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Nov 21 (Reuters) - London's FTSE 100 recovered ground on Friday, trimming earlier losses as increased expectations for Federal Reserve interest rate cuts improved global market sentiment, while investors now await next week's UK budget announcement.

The blue-chip index .FTSE, however, ended the week down 1.7%, marking a steeper weekly decline than those seen in April when markets were rattled by U.S. President Donald Trump's sweeping tariff announcements.

The more domestically-focused mid-cap index .FTMC extended its losing streak to an eighth consecutive session, dropping 0.1% on Friday and recording weekly losses of 2.2%.

Thursday's global rally, fueled by chip giant Nvidia's NVDA.O upbeat forecast, proved short-lived as concerns about a potential AI bubble resurfaced.

However, markets regained some footing after New York Fed President John Williams, a voting member of the Federal Open Market Committee, suggested the central bank could still implement rate cuts - boosting both rate cut expectations and overall sentiment.

In UK markets, beverages stocks .FTNMX451010 rose 2%, while homebuilders' stocks .FTNMX402020 gained 3.4%.

On the flip side, aerospace and defence stocks .FTNMX502010 fell 3.2% on the day to their lowest in three months, as investors monitored developments around a new U.S.-drafted plan to end the Russian war in Ukraine.

Precious metal miners .FTNMX551030 lost 2.2% even as gold prices pared losses from earlier in the session after falling more than 1%, while industrial metal miners .FTNMX551020 declined 1.8% after copper prices sank to their lowest level in over two weeks. GOL/MET/L

Economic indicators for Britain's businesses, consumers, and public finances showed troubling signs of deterioration ahead of next week's budget.

Finance Minister Rachel Reeves is expected to announce tax increases while data released on Friday suggested that budget concerns are weighing on the UK economy - highlighting her challenge of reducing borrowing without further hampering already sluggish growth.

Among individual movers, fast-fashion retailer ASOS ASOS.L dropped 5.3% after the company forecast lower annual profit than analysts' expectations.

(Reporting by Utkarsh Tushar Hathi; Editing by Shreya Biswas and Deepa Babington)

((utkarshtushar.hathi@thomsonreuters.com))