London-listed stocks rebounded Monday as investors hoped for further monetary stimulus from central banks to ease the economic impact of the coronavirus epidemic.
The blue-chip FTSE 100 gained 1.7%, while the mid-cap index was up 2%. Oil majors BP Plc and Royal Dutch Shell Plc each added four percent, depending on oil prices, and were the largest increases in the FTSE 100.
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The two benchmarks closed Friday with their biggest weekly declines since the 2008 financial crisis, with the epidemic threatening to spread into a global pandemic and cripple supply chains.
Investors now expect central banks around the world to make a coordinated effort to lower interest rates and support growth. Bets on the rate cut by the US Federal Reserve this month amount to 100%, according to the FedWatch tool from the CME group.
Miners, airlines and luxury goods manufacturers, which were among the hardest hit last week, increased from 1.6% to 2.4%.
The attention of investors in Britain will also turn to new Brexit negotiations, starting Monday, which aim to conclude a trade deal by the end of the year to govern everything from aviation to fishing and student exchanges.
On the other side of the chain, European stocks also stabilized on Monday after their worst weekly performance since 2008.
The pan-European STOXX 600 index rose 1.8% at 08:18 GMT, after falling 12% last week, with oil and gas companies and miners leading the way.
Sentiment strengthened as gloomy data from factory activity in China fueled hopes for further stimulus, even when new infections in the country subsided.
However, the virus continues to spread elsewhere. The United States reported their second death, while the United Kingdom reported a total of 36 cases on Sunday.
Italy, the hardest hit in Europe, saw its death toll rise to 34, five more than a day earlier.
Investors are betting that the US Federal Reserve will cut interest rates by 50 basis points in March, while the European Central Bank is expected to cut rates by 10 basis points (bp) at the April meeting.
Telecommunications equipment maker Nokia rose 4.6% on Monday morning after the resignation of longtime CEO Rajeev Suri in September.
Final manufacturing readings for Europe for February are expected later today