Equity markets around the world retreated after Thursday's gains, as investors focussed again on the underlying weaknesses in the global economy. Most British shares followed suit with the notable exception of the commodity sector, as prices of major industrial metals and oil rose.

"With the FTSE being slightly more weighted in the commodities and energy side of the equation, we were less negative than anyone else ... but I think U.S. negativity is undoubtedly the catalyst for the mild reaction we're seeing here in the UK," Alastair McCaig, market analyst at IG, said.

The blue-chip FTSE 100 index <.FTSE> was down 0.8 percent at 6,052.42 points at its close, posting its biggest weekly gain in a month after rallying 0.7 percent in the previous session.

The losses on the FTSE 100 were broad-based, and among the top fallers was microprocessor designer ARM Holdings (>> ARM Holdings plc), down 2 percent in a week marred by profit and outlook warnings from chip designers such as Imagination Tech (>> Imagination Technologies Group plc) and Dialog Semiconductor (>> Dialog Semiconductor PLC).

Analysts also cited concerns surrounding potential weakness in shipment volumes of Apple's (>> Apple Inc.) iPhones next year. ARM Holdings' technology powers Apple's iPhone.

Oil stocks also suffered on a weakening oil price, with BG Group (>> BG Group plc) the top faller, down 4 percent, and BP (>> BP plc) also retreating 0.3 percent.

A triple expiration of futures, index and stocks options also contributed to the dip on the index.

In positive territory, cruise operator Carnival (>> Carnival plc) rallied 2.6 percent after investors were cheered by a positive set of earnings results.

Miner Anglo American (>> Anglo American plc) was the top riser, gaining 5.7 percent, while BHP Billiton (>> BHP Billiton plc), Rio Tinto (>> Rio Tinto plc) and Antofagasta (>> Antofagasta plc) were all up between 0.3 percent and 2.5 percent. They advanced after metals prices gained following a fall in the U.S. currency, making dollar-priced metals cheaper for holders of other currencies.

"Recent history would indicate that these large swings in the share prices of commodity producers have been characteristic of a downtrend and attempts to catch the falling knife has not been without casualty," said Brenda Kelly, head analyst at London Capital Group.

UBS analysts said that the mining sector's outlook remained challenging, with valuations not compelling and free cashflow remaining negative or struggling to cover dividends.

However, it saw value in some selective stocks. For 2016, it preferred miners with low costs and strong balance sheets, including Rio Tinto and Randgold Resources (>> Randgold Resources Limited). Over the next two to three years, it liked companies such as Glencore (>> Glencore PLC), BHP Billiton and Fresnillo (>> Fresnillo Plc).

(Reporting by Atul Prakash; Editing by Andrew Heavens)

By Kit Rees and Atul Prakash