London-listed shares bounced back on Monday as investors hoped of further monetary stimulus from central banks to mitigate the economic impact of the coronavirus epidemic.
The blue-chip FTSE 100 gained 1.7 percent, while the mid-cap index was up two percent. Oil majors BP Plc and Royal Dutch Shell Plc added four percent each, tracking oil prices, and were the biggest boosts to the FTSE 100.
Both benchmark indexes had closed on Friday with their biggest weekly declines since the 2008 financial crisis as the outbreak threatened to blow into a global pandemic and cripple supply chains.
Investors now expect central banks around the world to launch a coordinated effort to cut interest rates and shore up growth. Bets of the US Federal Reserve reducing rates this month stand at 100 percent, according to CME Group’s FedWatch tool.
Miners, airlines and luxury goods makers, which were among the worst-hit sectors last week, were up between 1.6 percent and 2.4 percent.
Investor attention in Britain will also turn to fresh Brexit negotiations, starting on Monday, that aim to hammer out a trade deal by the end of the year to govern everything from aviation to fisheries and student exchanges.
Across the channel, European shares also steadied on Monday after their worst weekly showing since 2008.
The pan-European STOXX 600 index rose 1.8 percent by 0818 GMT, after a 12 percent slump last week, with oil and gas companies and miners leading the gains.
Sentiment firmed as bleak factory activity data out of China fuelled hopes of more stimulus, even as new infections in the country declined.
However, the virus continues to spread elsewhere. The United States has reported its second death, while the United Kingdom reported a total of 36 cases as of Sunday.
Italy, the worst-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 as early as March, while the European Central Bank is expected to cut rates by 10 basis points (bps) at the April meeting.
Among the top gainers on Monday morning were telecoms equipment maker Nokia, up 4.6 percent after announcing long-time Chief Executive Officer Rajeev Suri would step down in September.
Final readings of manufacturing activity in Europe for February are due later in the day