Britain's FTSE 100 saw its biggest percentage gain since October of the previous year, buoyed by strong performances from European luxury firms. Earnings reports from Burberry and Diageo fueled the surge, while robust data revealing a two-year high in UK consumer sentiment further uplifted investor confidence.

Closing the week with a 1.4 per cent climb, the FTSE 100 marked its first weekly gain for the year, delivering the most substantial increase in over four months. Simultaneously, the midcap FTSE 250 index also saw a 0.6 per cent rise, securing its most substantial weekly gain in six weeks.

British luxury retailer Burberry surged 4.9 per cent, influenced by positive results from French luxury giant LVMH, which reported a 10 per cent surge in fourth-quarter sales. This encouraging data reassured investors about the luxury sector's resilience, particularly in the face of economic challenges, notably in China.

The personal goods sub-index experienced a robust 4.2 per cent climb, its most significant percentage increase in over a month. The beverages sub-index, emerging as the top-performing sector, soared by 4.6 per cent, propelled by a 5.1 per cent rise in shares of Diageo, the maker of Johnnie Walker whisky. The positive momentum followed French spirits maker Remy Cointreau beating third-quarter sales expectations.

The broader European market also reflected the optimistic sentiment, with the pan-European STOXX 600 index closing 1.1 per cent higher, reaching its highest level in two years.

A boost to this upbeat scenario came from a consumer confidence survey, revealing that British consumers are currently at their most confident since January 2022, supported by lower inflation, which has positively impacted their financial outlook.

Despite the overall positive trend, some individual stocks faced challenges. Tullow Oil experienced a 6.0 per cent drop after being downgraded to "sell" by Stifel. On the other hand, Vodafone shares gained 3.9 per cent following the British government's approval of the telecom operator's strategic relationship agreement with Abu Dhabi-based telecoms group e&.

However, Superdry witnessed a 2.6 per cent decline after the fashion retailer expressed a lack of optimism regarding market conditions in the near term, citing a challenging Christmas season. The company also announced the departure of its finance chief, Shaun Wills, at the end of March.

(With Reuters inputs)