THE FTSE 100 backed down from Thursday's record highs as the pound rebounded on reports that the EU was working on proposals for a post-Brexit trade deal with Britain.
London's blue chip index ended the session down 0.28 per cent or 20.8 points at 7,535.44, edging down from record highs of 7,556.24 a day earlier, having been spurred by a decline in the pound amid fears over stalled Brexit talks.
But sterling recovered after a leaked document seen by reporters in Brussels suggested that EU leaders meeting at the European Council summit next week could authorise "internal preparatory discussions" on the shape of a future trade relationship and a transition deal, in a move which could offer Prime Minister Theresa May hope for talks by the end of the year.
It helped prop the pound up 0.3 per cent versus the US dollar to trade at 1.330, and up 0.3 per cent against the euro to 1.123.
David Madden, a market analyst for CMC Markets UK, said: "GBP/USD drove higher today after reports came out that the EU are working on a proposal for a post-Brexit trade deal with the UK, this announcement reversed the dip in the pound yesterday."
He added that weaker-than-expected retail and inflation data out of the US was also weighing down the dollar, lifting sterling further.
"The pound has crawled back most of the losses it incurred in October so the sentiment is turning for sterling."
Across Europe, the French Cac 40 ended the day down 0.17 per cent while the German Dax rose 0.07 per cent.
Brent crude prices were up 1.5 per cent at $57.24 as investors cheered data showing a rise in Chinese oil imports in September, signalling further rebalancing in the commodity market.
In the London equity market, mining stocks were at the top of the FTSE 100, with Rio Tinto up 107.5p at 3,688.5p and Glencore up 8.65p at 376.6p.
It comes after Deutsche Bank raised its target price for a spate of mining companies amid a brighter outlook for copper, zinc and nickel prices.
GKN tumbled to the bottom of the blue chip index, dropping 34.8p to 318p, as the engineering firm warned that profits will only be "slightly above" 2016 after taking a £40 million hit linked to legal claims and a £15m write-down.
The company said it had been made aware of two "probable claims" which are expected to result in a charge of around £40m in the fourth quarter, one of which relates to GKN Aerospace and the other to GKN Driveline, but the firm did not reveal any further details.
Provident Financial shares surged 98p to 887p despite confirming it would book heavy losses at its consumer credit business this year.
However, the troubled sub-prime lender claimed it was making progress with its turnaround plan, and that a management shak-eup in its consumer credit operations had "prevented any further deterioration in performance".
Shares in Aldermore rocketed 47.5p to 303.5p after the challenger bank revealed it had received a £1 billion-plus takeover approach from South Africa's FirstRand.
The biggest risers on the FTSE 100 were Rio Tinto up 107.5p to 3,688.5p, Glencore up 8.65p to 376.6p, Johnson Matthey up 67p to 3,475p, and Pearson up 12p to 634p.
The biggest fallers on the FTSE 100 were GKN down 34.8p to 318p, Centrica down 4.4p to 174.6p, Smurfit Kappa Group down 50p to 2,180p, and Experian down 28p to 1,536p.
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