LONDON (Reuters) - The FTSE 100 had its best weekly gain so far this year after inching higher on Friday, boosted by strong UK retail sales data and a rally in motor insurer stocks.
The outlook for corporate earnings, however, was less upbeat, with heavyweight oil company Royal Dutch Shell warning on its profits and U.S. chipmaker Intel Corp missing profit expectations.
Insurer Admiral Group rose 6.1 percent to the top of the FTSE 100 as data showed a multi-year decline in car insurance prices slowed in the last quarter of last year, potentially opening the door for some earnings upgrade for shares in the industry.
"The trend would be consistent with a stabilisation and, hopefully, an improvement in prices sometime in 2014," said Ben Cohen, an analyst at Canaccord Genuity.
"We are in an environment where there hasn't been a lot of upward earnings revision across the whole sector and investors are keen to buy into sub-sectors where you've got some signs of positive earnings momentum."
Analysts have cut their profit estimates for insurers in Britain's FTSE 350 index by 0.7 percent in the past three months, with non-life insurance companies such as eSure, Direct Line and RSA Insurance Group suffering some of the steepest downgrades, Thomson Reuters StarMine data showed.
The three stocks rose between 0.8 percent and 6.1 percent on Friday, with the broader FTSE 350 non-life insurance up 1.7 percent.
The blue-chip FTSE 100 closed 13.88 points higher, or 0.2 percent, at 6,829.30 points.
Sentiment was also supported by data showing British retailers reported the fastest annual sales growth in more than nine years in December, with activity expanding at more than double the expected pace.
The FTSE was up 1.3 percent for the week, its biggest rise since late last year, and it has risen nearly 12 percent in the past 12 months.
Andy Ash, head of sales at Monument Securities, said he was taking profit on the FTSE in light of weak corporate earnings, especially in the United States, at a time when the U.S. Federal Reserve starts to reduce its equity-friendly stimulus programme.
"We've been long this week and we'll probably be taking profit now," Ash said.
Royal Dutch Shell's two listings knocked a combined 5.6 points off the FTSE after the oil major warned its fourth-quarter figures are expected to be significantly lower than recent levels of profitability because of oil and gas prices and problems with its refining business.
"When you're talking about higher costs and lower production volumes, it's a lethal combination," Nick Xanders, who heads up European equity strategy at BTIG, said.
"It's symptomatic of the entire market, with costs rising but revenues not coming through. Some hope that it's a company specific thing, but I don't think it is."
Bookmaker William Hill was the top FTSE faller on concerns about tighter gambling rules in Britain after it said on Friday it would work with the government to tackle concerns about the use of high stakes gambling machines in its betting shops.
The stock fell 3.4 percent in volume 3-1/2 times its average for the past three months, compared with FTSE volume 57 percent above the index's own average.
Miners extended a bounce after Rio Tinto's good results on Thursday to record a 7.1 percent gain for the week, their best since September 2012.