The FTSE 100 closed 1.62% higher at 6,588.53, and the FTSE 250 advanced 1.49% at 21,221.46
London stocks ended strongly in the black on Monday, as bond markets recovered and housebuilders advanced.
The FTSE 100 closed the session up 1.62% at 6,588.53, and the FTSE 250 advanced 1.49% at 21,221.46.
Sterling was stronger as well, gaining 0.06% against the dollar to trade at $1.3942, and adding 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, he said. 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 little bit more than initially estimated in February, but remained subdued due to supply chain disruptions.
The IHS Markit/CIPS manufacturing purchasing managers’ index rose to 55.1 from a flash estimate of 54.9 and January’s reading of 54.1.
According to the survey, 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 (BoE) 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 dropped from December’s figure of £5.6bn and the number of house purchase approvals dropped to 99,000 from 102,800.
Those figures were well above recent trends and indicated the start of a market slowdown fuelled by Chancellor Sunak’s stamp duty holiday for the first £500,000 of a property purchase.
That tax break is scheduled 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 gainers, with Persimmon rising 5.37%, Taylor Wimpey gaining 5.68%, Barratt Developments advancing 5.06%, Berkeley Group adding 5.23%, Crest Nicholson climbing 6.35% and Vistry up 3.8%.
Those gains came on the back of the news that the Chancellor would unveil a mortgage guarantee scheme to help first-time buyers in his budget this week.
As part of the scheme, the government would offer incentives to lenders which would mean that buyers would be able to purchase 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 gained 2.3% as it raised its offer for Swedish rival Enlabs to SEK53 from SEK40.
