London stocks finished firmly in the black on Monday, as bond markets recovered and housebuilders paced the advance.
The FTSE 100 ended the session up 1.62% at 6,588.53, and the FTSE 250 was ahead 1.49% at 21,221.46.
Sterling was stronger as well, last rising 0.06% against the dollar to trade at $1.3942, and gaining 0.26% on the euro to 1.1570.
“Equity markets have shaken off the negative sentiment that was doing the rounds last week as the pullback in government bond yields has seen buyers step into the fold,” said CMC Markets analyst David Madden.
“Yields have cooled in light of the updates from central banks that they will not be pushed around by the bond market.”
Madden said that the US Federal Reserve was “not overly concerned” over the rise in the 10-year yield in recent months, while the European Central Bank’s chief economist Philip Lane had spoken of flexibility with regard to bond purchases.
“Traders feel more confident about snapping up relatively cheap stocks as they are less fearful that central banks will look to tighten their policy anytime soon.
“The focus has switched back to the Biden administration as the planned $1.9trn spending scheme was approved by the House of Representatives, so now the Senate is debating the proposal.”
A survey released earlier showed that activity in the manufacturing sector grew a touch more than initially estimated in February, but remained subdued amid supply chain disruptions.
The IHS Markit/CIPS manufacturing purchasing managers’ index ticked up to 55.1 from a flash estimate of 54.9 and January’s reading of 54.1.
A reading above 50.0 signals expansion, while a reading below indicates contraction.
Meanwhile, business optimism rose to a near six-and-a-half year high.
The survey found supply-chain disruption and rising cost pressure meant there was only marginal growth in output despite a modest improvement in new order intakes.
Elsewhere, figures from the Bank of England showed mortgage borrowing remained strong at £5.2bn in January and households continued to pay off debt amid economic uncertainty.
The value of mortgages approved dipped from December’s figure of £5.6bn and the number of house purchase approvals fell to 99,000 from 102,800.
Those figures were well above recent trends and indicated the start of a slowdown in a market fuelled by Chancellor Rishi Sunak’s stamp duty holiday for the first £500,000 of a property purchase.
That tax break is due to finish at the end of March but Sunak is reported to be considering extending the deadline in his budget on Wednesday.
In equity markets, housebuilders were the standout gainers, with Persimmon up 5.37%, Taylor Wimpey ahead 5.68%, Barratt Developments adding 5.06%, Berkeley Group rising 5.23%, Crest Nicholson jumping 6.35% and Vistry 3.8% higher.
Those gains came on the back of the news that Chancellor Rishi Sunak would unveil in his budget this week a mortgage guarantee scheme to help first-time buyers.
As part of the scheme, the government would offer incentives to lenders which would mean that people would be able to buy properties worth up to £600,000 with a deposit of just 5%.
Morgan Stanley said that would be a “clear positive” for UK homebuilders, given their sensitivity to the house price trajectory.
Elsewhere, Ladbrokes owner Entain was in the black by 2.3% as it raised its offer for Swedish rival Enlabs to SEK53 from SEK40.
Pennon was boosted 5.51% by an upgrade to ‘overweight’ at Barclays, while cruise operator Carnival rallied 4.95% on the back of an initiation at ‘buy’ by Peel Hunt.
FTSE 100 (UKX) 6,588.53 1.62%
FTSE 250 (MCX) 21,221.46 1.49%
techMARK (TASX) 3,997.68 1.63%
FTSE 100 – Risers
International Consolidated Airlines Group SA (CDI) (IAG) 205.30p 6.95%
Taylor Wimpey (TW.) 166.55p 5.68%
Pennon Group (PNN) 922.80p 5.51%
Persimmon (PSN) 2,729.00p 5.37%
Berkeley Group Holdings (The) (BKG) 4,265.00p 5.23%
Barratt Developments (BDEV) 698.00p 5.06%
M&G (MNG) 193.10p 5.00%
Anglo American (AAL) 2,898.00p 4.53%
Scottish Mortgage Inv Trust (SMT) 1,186.00p 4.49%
Rightmove (RMV) 589.60p 4.35%
FTSE 100 – Fallers
HSBC Holdings (HSBA) 420.15p -1.42%
Informa (INF) 543.80p -1.27%
Ocado Group (OCDO) 2,176.00p -1.09%
Tesco (TSCO) 222.60p -0.98%
Sainsbury (J) (SBRY) 224.20p -0.88%
Fresnillo (FRES) 902.60p -0.81%
B&M European Value Retail S.A. (DI) (BME) 543.20p -0.59%
Morrison (Wm) Supermarkets (MRW) 170.00p -0.50%
Lloyds Banking Group (LLOY) 39.00p 0.01%
Next (NXT) 7,570.00p 0.13%
FTSE 250 – Risers
Bellway (BWY) 2,997.00p 6.73%
Crest Nicholson Holdings (CRST) 341.60p 6.35%
Baillie Gifford US Growth Trust (USA) 342.00p 5.56%
Just Group (JUST) 95.40p 5.47%
Allianz Technology Trust (ATT) 2,895.00p 5.46%
IWG (IWG) 379.20p 5.33%
Edinburgh Worldwide Inv Trust (EWI) 369.00p 5.28%
Capita (CPI) 47.61p 5.24%
Investec (INVP) 205.90p 5.19%
Redrow (RDW) 571.00p 5.14%
FTSE 250 – Fallers
Petropavlovsk (POG) 26.20p -4.38%
Rank Group (RNK) 170.40p -3.84%
Jupiter Fund Management (JUP) 284.60p -3.66%
Hochschild Mining (HOC) 207.20p -3.63%
Plus500 Ltd (DI) (PLUS) 1,321.00p -3.37%
Kainos Group (KNOS) 1,284.00p -2.43%
Sanne Group (SNN) 575.00p -2.21%
CMC Markets (CMCX) 398.00p -1.97%
Serco Group (SRP) 127.60p -1.85%
Big Yellow Group (BYG) 1,115.00p -1.76%