A trader monitors the screen on a trading floor in London.

London - Britain's blue chip shares rebounded on Friday to post their seventh weekly gain of the year, with investors using the previous session's sharp sell-off to dip their toes back into the market at cheaper levels.

The German Ifo data added to the more upbeat mood. The keenly-watched business morale index rose to a 10-month high in February, beating even the highest of economists' forecasts and following hot on the heels of a strong ZEW index earlier this week.

The FTSE 100 closed up 44.16 points or 0.7 percent at 6,335.70 points, eking out a 0.1 percent gain for the week and moving back towards Wednesday's 5-year high of 6,412.44.

The gains follow a 1.6 percent drop the previous session - the index's worst day since July - on concerns the US Federal Reserve could end its stimulus programme sooner than expected, thus removing a driver of the global equity rally.

“So far this year, any big sell-offs or sharp retracements have been met by buying, that goes to indicate that there is still quite bullish investor sentiment out there,” said Angus Campbell, head of market analysis at Capital Spreads.

“In all honesty there might have been a bit of an over-reaction to the Federal Reserve minutes by the markets. We've also been supported by the good Ifo numbers from Germany.”

Implied volatility on the FTSE 100 - a crude gauge of investor risk aversion - eased back from two-week highs.

Technical charts also offered a positive note, with the UK index bouncing up from the 38.2 percent Fibonacci retracement of the Feb. 7 to Feb. 20 rally to finish around the 10-day moving average.

Among individual stocks, Melrose Industries added 2.2 percent, with traders citing positive sentiment after news of a takeover bid in the sector.

Private equity firm KKR & Co has submitted an offer of $75 per share for Gardner Denver Inc, valuing the industrial machinery maker at close to $3.7 billion, sources told Reuters on Thursday.

Volumes on the FTSE 100, however, were relatively light at 95 percent of their 90-day daily average, with some investors cautious ahead of the weekend's elections in Italy. A close-run race could lead to political instability, with possible repercussions for the rest of Europe.

“Italy is the unruly child of Europe so this might weigh on sentiment,” said Anita Paluch, sales trader at Gekko Capital Markets. “What we have seen is that some people are closing positions or going short” into the weekend, she added. - Reuters