(Reuters) - British blue-chip shares were higher on Friday, on track for their best week in over three months with support from housebuilders, while reassurance from the U.S. Federal Reserve and progress in U.S.-China trade talks offered some support.
London's FTSE 100 <.FTSE> rose 0.8 percent by 0925 GMT, outperforming European shares and on course to end 2019's first full trading week with the biggest gains since September.
The FTSE 250 <.FTMC> was 0.4 percent higher, on track for its highest weekly gains in over two months. Both indexes also hit their highest in more than a month.
Fed chairman Jerome Powell stressed again that the U.S. central bank can be patient in approving further rate hikes, while on the trade spat front, Treasury Secretary Steven Mnuchin said Chinese Vice Premier Liu He was likely to visit Washington later this month.
Shares on Wall Street notched their fifth consecutive session of gains following Powell's comments on Thursday, with Asian and European markets following suit.
But political tension deepened in Britain with Labour leader Jeremy Corbyn calling on MPs to help his opposition party break the deadlock over Brexit and support a motion of no confidence in the government to trigger an election.
Homebuilders, among the most sensitive to Brexit developments, shrugged off uncertainties and bounced after Bank of America Merrill Lynch upgraded the UK housebuilding sector to neutral.
Homebuilders <.FTNMX3720> enjoyed their best week in more than a year, thanks to the BAML upgrade as well as a solid update from Britain's third-largest housebuilder Taylor Wimpey earlier in the week.
Taylor Wimpey <TW.L> added 4.1 percent to lead FTSE 100 gainers, set for its biggest weekly gain since early November, with Persimmon <PSN.L>, Barratt Developments <BDEV.L> and Berkeley <BKGH.L> all advancing 1.6 to 3.4 percent.
"It seems at least possible, or even probable, that some sort of Brexit resolution is within sight and therefore the UK House Building sector may see some relief," BAML analysts wrote.
Reuters reported that two of the biggest donors to the Brexit campaign say they now believe it will eventually be abandoned by the government and that Britain will stay in the European Union.
Peter Hargreaves, the billionaire who was the second biggest donor to the 2016 leave campaign, and hedge fund manager Crispin Odey told Reuters they expect Britain to stay in the EU.
Adding to worries at home, official data showed that Britain's economic growth hit a six-month low in the three months to November as factories suffered from tough global trade conditions ahead of Brexit.
Energy shares <.FTNMX0530> were the biggest boost to the main index, climbing to their highest in more than a month as crude prices eyed solid weekly gains.
Airline Flybe <FLYB.L> plummeted as much as 90 percent to a life low of 1.7 pence after a heavily discounted 1 pence-per-share buyout offer from a consortium of Virgin Atlantic Ltd, Stobart <STOB.L> and Cyrus. Shares were down 80 percent by 0926 GMT.
Stobart jumped 7 percent to top mid-cap winners after the news.
Retailers continued to upset the markets.
AIM-listed fast-fashion retailer Quiz <QUIZ.L> tanked 30 percent to a record after a revenue warning following disappointing Christmas sales, while suit retailer Moss Bros <MOSB.L> also flagged the period ahead to be "extremely challenging".
Some respite was offered by online electricals retailer AO World <AO.L> which rose 4 percent after its Christmas quarter sales topped Jefferies' estimates thanks to what the brokerage called "well-planned Black Friday promotions".
UDG Healthcare <UDG.L> slumped 7.6 percent to be the biggest mid-cap faller after Jefferies downgraded the stock and said the healthcare services provider's preliminary expectation for the year "does not sound attractive".
(Reporting by Muvija M, additional reporting by Pushkala Aripaka in Bengaluru, Editing by Helen Reid and Angus MacSwan)