FTSE set for biggest weekly rise in two years

By Francesco Canepa LONDON (Reuters) - The FTSE 100 headed to its biggest weekly gain in two years on Friday, led by recent laggards such as insurer Aviva and Tullow Oil as analysts recommended snapping up battered shares after a recent selloff. Fund managers and traders cited a gradual wind-down in trading activity as investors cut risk before the holiday season. British supermarket chain Tesco, which has been trading at depths not seen since 2003, was up 5.5 percent. "Trading has been volatile. Now investors are trimming positions ahead of the few days off, just wanting to reduce the risk," said Mark Ward, head of execution trading at Sanlam Securities. Barclays, which had fallen 11.6 percent in just over a week, rose 1.3 percent after the judge overseeing New York state's lawsuit accusing it of fraud in its alternative trading system raised questions about the case. At the close, the broader FTSE 100 index was up 1.2 percent at 6,545.27 points, adding to a 2 percent rise on the previous day and up 3.9 percent for the week, the biggest weekly rise since December 2011. Tullow Oil gained 6.9 percent, rising as Brent crude rallied back above $60. The stock is down 50 percent this year, suffering from a steep decline in the price of oil. Britain's public finances improved sharply in November, official data showed on Friday, helped by a fine on banks hit by a foreign exchange trading scandal. Global equities have been rallying since Federal Reserve Chair Janet Yellen said on Wednesday that U.S. interest rates were unlikely to rise for "at least a couple of meetings," meaning April at the earliest. Before this bounce, the FTSE had fallen nearly 9 percent in 1-1/2 weeks, as a slide in commodity prices hit energy and mining stocks and concerns about Russia's financial stability dampened emerging market economies. "When these turns happen quickly, there's fear of missing out," Ian Williams, a strategist at Peel Hunt, said. "It may be that we need the dust to settle and people to reconsider things in January before we get a real idea of whether this rally is sustainable." Bernstein said insurer Aviva was "a last minute Christmas bargain" and upgraded the stock to outperform from neutral after a 15 percent fall in the stock since the announcement of a deal to buy Friends Life in November. Aviva's shares rose 3 percent on Friday. "We believe the recent sell-off provides an attractive entry point into the stock, even for those – like us – who are only prepared to value the synergies and cash return," the analysts wrote in a note. (Additional reporting by Alistair Smout; Editing by Mark Heinrich)