UK stocks muted near multi-week highs as retail sales, consumer sentiment sag

Dec 19 (Reuters) - UK stocks paused on Friday near multi-week highs as weakness in homebuilder shares weighed following retail sales and consumer sentiment data that pointed to an economic slowdown.

The UK's blue-chip FTSE 100 was flat at 1058 GMT. The domestically focussed midcap FTSE 250 index was down 0.1% after hitting a seven-week high in early trading. Both the indexes headed for weekly gains.

Britain's longest-running consumer survey showed only a slight pick-up in confidence in December, after finance minister Rachel Reeves announced £26 billion ($34.76 billion) of tax hikes. A separate report revealed that retail sales declined last month, reinforcing warnings from retailers about challenging conditions in the run-up to Christmas.

Meanwhile, sterling hit a 17-year high against the euro and the dollar after the Bank of England cut interest rates by 25 basis points on Thursday as expected. The central bank's close vote showed some policymakers were not sure whether more cuts were needed, since inflation is still the highest among the G7 economies.

The FTSE 100 has climbed about 20% year-to-date, outpacing Wall Street's benchmark S&P 500's 15.1% gain. This was largely driven by strong gains in UK financial stocks, particularly banks and insurers - which benefited from higher interest rates, undervaluation, and resilient credit conditions.

On the day, homebuilders, which are sensitive to the domestic economy, led losses with a 2.1% decline. Barratt Redrow was down 2.9% after Citigroup cut its target price to 506 pence from 530 pence. Bellway and Berkeley Group Holdings were both down 1.7% and 1.9% respectively.

Precious metals and miners also slipped after gold prices lost their footing against a perky dollar. [GOL/]

Among individual stocks, WH Smith fell 3.7% after the travel retailer forecast profit next year to stay almost at the same levels as 2025, as it reviews some of its North American businesses after accounting failures in its U.S. operations exposed gaps in its financial controls. The UK's financial regulator has also opened an investigation into the company.

Shares of mid-size lenders OneSavings Bank and Metro Bank gained 2.5% and 0.2% after both were reclassified by the Bank of England as transfer firms under the MREL regime, meaning if the banks ever faced collapse, it would be resolved by transferring their business to another firm, which reassures investors and depositors.

($1 = 0.7479 pounds)

(Reporting by Tharuniyaa Lakshmi and Medha Singh in Bengaluru; Editing by Maju Samuel)