News: RIO UK stocks eye strongest gains in a month, Rolls Royce soars

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• FTSE 100 down 0.5 pct
• Set for strongest in five weeks
• Rolls Royce revs up 10 pct to 4-year high
• Tesco up 2 pct on sales results
• Indivior sinks 16 pct on generic drug threat

Rolls-Royce was the bright spot on a falling FTSE 100 on Friday as energy and banking stocks tumbled, while Britain's major share index remained on track for a strong week thanks to a dovish ECB.

The FTSE 100 .FTSE was down 0.5 percent by 0840 GMT, but set for a 0.6 percent gain on the week after three consecutive weeks of losses.

A more dovish than expected interest rate outlook from the ECB sent shares across Europe surging on Thursday, with the FTSE 100 also benefiting thanks to its heavy weighting in high dividend-yielding, interest rate sensitive stocks.

Overall UK shares have had a strong run in recent weeks, outperforming all European benchmarks in May, as investors warm once again to the market. Strong retail sales figures on Thursday helped fuel nascent optimism on the domestic economy.

Rolls-Royce RR.L shares were the biggest boost to the index on Friday, surging 12 percent to four-year high after the engine maker issued ambitious mid-term goals.

"The company's new mid-term ambition of more than 1 pound per share in free cash flow implies more than 1.8 billion pounds in total free cash flow. This is well ahead of 2020 company compiled consensus," said Goldman Sachs analysts.

"Investor discussions had focussed on whether 2020 was peak free cash flow, therefore this 1.8 billion figure is a clear positive."

Tesco TSCO.L shares rose 2.2 percent after Britain's biggest retailer reported strong results, saying a drive to lower prices had boosted its quarterly sales.

"Continued upbeat UK retail momentum, accelerating share gains at Booker and reducing pressures in Thailand all make for an upbeat start to Tesco's 18/19," said Jefferies analysts.

Financials were the biggest drag, tracking weakness in the sector across Europe as investors priced in a longer wait before an ECB rate hike. Banks suffer from negative interest rates which eat into their lending margins.

Energy stocks also weighed as oil prices stalled, with investors eyeing a potential supply hike at a key OPEC meeting in Vienna next week.

Mining stocks slipped as London copper prices lost ground for a second session, with the market set for its biggest weekly decline since late April on concerns over slowing growth in top consumer China.

Rio Tinto RIO.L , BHP Billiton BLT.L , Anglo American AAL.L were top fallers, down 1.7 to 2.2 percent.

Consumer staples stocks such as Unilever and Diageo continued to climb as high dividend yielding "bond proxy" sectors benefited from the ECB pushing back rate rises.

Among mid-caps, Indivior INDV.L shares sank 16.5 percent to a two-month low after its rival Dr Reddy's Laboratories REDY.NS got U.S. FDA approval for a generic version of its opioid addiction treatment, Suboxone Film.

"Dr Reddy's still does not have a settlement, but we wouldn't rule out the possibility of an at risk launch, as the company has previously disclose that it is comfortable about its IP position on this product," said Goldman Sachs analysts.

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