The FTSE 100 ended a four-day losing streak to rise 1%, but worries over the spread of the virus have spoiled risk appetite in the past few days and dragged the index to its worst weekly performance in nearly two months.
The FTSE 250 also firmed 1%, getting a further boost as early readings of the IHS Markit/CIPS UK Purchasing Managers' Index (PMI) showed Britain's vast services sector returned to growth in January for the first time since August.
A standout loser across the board was Finablr, which plummeted 27% to a fresh life low after it disclosed its majority owner had pledged over half the company's stock as security against certain debts it incurred.
Global headlines were dominated by the new coronavirus which has killed 26 people and infected more than 800 so far.
The U.S. confirmed a second case of the virus in the country on Friday.
While the WHO termed the outbreak "an emergency in China", it refrained from declaring it an epidemic of international concern.
FXTM market analyst Han Tan suggested dealers were also taking heart from China's efforts to lock down the epicentre of the outbreak, potentially limiting its spread and impact.
China has suspended public transport in 10 cities and a media report suggested that a hospital to treat infected people will be constructed by as soon as Monday.
"The virus itself is not the issue from an economic perspective; instead, it is the self-perpetuating negative feedback loop on economic activity that it creates," OANDA analyst Jeffrey Halley said.
Car retailer Auto Trader led the FTSE 100 leaderboard, rising 3.4% to 595.6 pence after Morgan Stanley lifted the price target to 650 pence from 560 pence.
Lagging the blue-chips was Just Eat, which gave up 2% after Britain's competition watchdog said it would investigate Takeaway's takeover of the food delivery company.
UAE-focused NMC Health lost 4.1% after Emirates NBD Bank sold a stake, just weeks after the healthcare company was criticised by U.S. short-seller Muddy Waters.
Marston's fell 5.3% underperformed midcaps as investors overlooked a growth in sales over the two-week Christmas holiday period and focused on the pub operator's warning of extra costs due to a higher-than-expected rise in minimum wages.
(Reporting by Shashwat Awasthi and Muvija M in Bengaluru; Editing by Bernard Orr, Anil D'Silva and Nick Macfie)
By Shashwat Awasthi and Muvija M