London close: Stocks rise on higher yuan, analysts' optimism

Stocks finished near their best levels of the day as Morgan Stanley and JP Morgan weighed-in with positive short-term views on global equity markets and after soothing words from the president of the European Central Bank and People's Bank of China.

Speaking to the European Parliament, ECB chief Mario Draghi said the monetary authority stood to ready to act if either the decline in commodity prices or a less effective monetary policy because of problems at banks were found to threaten price stability in the euro area.

Earlier in the day, China's central bank set a higher fixing for the country's currency, the yuan, close on the heels of remarks by the PBoC chief over the weekend that analysts hoped might indicate less of an inclination by China to depreciate its exchange rate.

The remarks out of China, in particular, helped front-month Brent crude oil futures rise by 0.773% to $33.61 on the ICE alongside a 1.7% gain in three-month copper futures to $4,567.50 per metric tonne on the LME.

Against that backdrop, Britain's top flight index closed 116.68 points or 2.04% higher at 5,824.28.

The ECB chief also emphasised that European banks' capital positions had been strengthened significantly since the crisis.

Draghi called for fiscal stimulus, where possible, and further structural reforms too.

His words weighed on the euro, which retreated 0.45% against the pound to trade at 0.7723 and 0.74% versus the US greenback to end the day at 1.1152.

China sets a higher fix, less devaluation risk seen

Overnight, China's central bank set a higher daily reference value for the country's currency, with central bank chief Zhou Xiaochuan talking over the weekend about the need for patience in balancing reform, growth and stability, as well as China's need to remain a responsible economic power.

The PBoC set the daily fixing for the country's currency, the yuan, 0.3% higher at 6.5118 - its loftiest level since November.

On the back of Xiaochuan's remarks, Deutsche Bank's chief economist for the region, Zhiwei Zhang, lowered his estimate on the odds for a large renminbi devaluation from 15% to 10%.

US equity markets were closed on Monday in observance of Presidents' Day, contributing to lower than average trading volumes overseas.

JP Morgan and Morgan Stanley voice tactical optimism

Strategists from two of the world's largest brokers weighed-in with positive short-term views on equity markets at the start of the week.

"Some tactical indicators are again signaling that equities are becoming oversold in the short term, which could argue for a near-term bounce, potentially a bigger and more durable one than the 6-8% up move we saw toward the end of January," Mislav Matejka from JP Morgan said in a research report sent to clients.

Risk-markets were oversold and more likely to rally than fall over the coming month, one of the world's largest brokers told clients on Monday, Morgan Stanley's cross-asset strategy team chimed in.

In a research note sent to clients, analysts Andrew Sheets, Phanikiran Naraparaju, Serena Tang and Wanting Low said global equities had already matched the median 'bear-market' in terms of duration and were more than three-quarters through the median price decline.

A global economic recession was a part of Morgan Stanley's bear-market scenario.

Consumer goods giant's savings programme delivers earlier than expected bang

Reckitt Benckiser saw broad growth in the year to 31 December, despite a year of mixed market conditions. The FTSE 100 consumer goods giant saw total net revenue grow 5% on a constant currency basis to £8.87bn, and like-for-like revenue grow 6%, which exceeded the company's targets. Reckitt's gross margin expanded during the year by 140 basis points to 59.1%, which the company's board said was driven by mix, commodity costs and cost optimisation initiatives.

British Airways and Iberia parent International Consolidated Airlines flew higher on Monday after Bank of America Merrill Lynch upgraded its stance on the stock to ‘buy’ from ‘underperform’ with an unchanged price target of 610p.Overall, the bank reiterated its structurally bearish equity and credit view on the European airlines. Nonethless, it added that “we continue to appreciate that even the most value-destructive companies can have ‘their day in the sun,’ particularly in these increasingly volatile times”.

Banking giant HSBC said it had decided to retain its headquarters in the UK, adding that it was dropping its three-yearly review of where it is based. The bank said the board's decision was unanimous and comes after HSBC had threatened to move to Hong Kong in retaliation for stricter UK regulation. In a statement, HSBC said the UK was "an important and globally connected economy. It has an internationally respected regulatory framework and legal system, and immense experience in handling complex international affairs."

Defence group BAE Systems appointed Charles Woodburn to the newly-created role of chief operating officer. Woodburn would report to chief executive Ian King and be appointed to the BAE Systems board as an executive director in the second quarter of this year.

Fidessa confirmed its dividends as it posted flat pre-tax profit but a rise in revenue, as it continues with its investment programme. In its preliminary results for the year to the end of December, Fidessa reported flat pre-tax profit of £39.1m, although revenue rose 7% to £295.5m, beating consensus expectations of £290m.

Acacia Mining remained confident in a low gold price environment at the end of 2015, with the company reporting muted full year numbers on Monday, but an ongoing cost cutting plan to ensure sustainability. The FTSE 250 mining firm saw revenue dip 7% in the 12 months to 31 December to $868m (£597.71m), which it blamed on the 8% lower average gold price during the year.

United Arab Emirates-based healthcare provider Al Noor Hospitals’ merger with South Africa’s Mediclinic has been completed.

Market Movers

FTSE 100 (UKX) 5,824.28 2.04%
FTSE 250 (MCX) 15,730.83 1.94%
techMARK (TASX) 2,992.65 2.40%

FTSE 100 - Risers

Reckitt Benckiser Group (RB.) 6,371.00p 6.79%
Standard Chartered (STAN) 453.05p 5.61%
Hammerson (HMSO) 563.50p 5.33%
Anglo American (AAL) 393.35p 5.19%
International Consolidated Airlines Group SA (CDI) (IAG) 504.50p 5.15%
Shire Plc (SHP) 3,797.00p 4.34%
Worldpay Group (WI) (WPG) 299.00p 4.07%
British Land Company (BLND) 678.50p 3.98%
Hargreaves Lansdown (HL.) 1,175.00p 3.98%
GKN (GKN) 265.40p 3.92%

FTSE 100 - Fallers

Fresnillo (FRES) 874.00p -2.56%
Randgold Resources Ltd. (RRS) 6,030.00p -2.03%
Berkeley Group Holdings (The) (BKG) 3,157.00p -0.75%
BHP Billiton (BLT) 693.60p -0.43%
SABMiller (SAB) 4,138.00p -0.24%
Sage Group (SGE) 565.50p -0.09%
BP (BP.) 332.80p 0.09%
Rio Tinto (RIO) 1,851.00p 0.19%
Rexam (REX) 596.50p 0.42%
Taylor Wimpey (TW.) 171.60p 0.47%

FTSE 250 - Risers

Fidessa Group (FDSA) 1,970.00p 11.24%
Tullow Oil (TLW) 178.60p 7.66%
Enterprise Inns (ETI) 79.80p 7.47%
NCC Group (NCC) 280.60p 7.47%
Atkins (WS) (ATK) 1,238.00p 6.91%
Genus (GNS) 1,442.00p 6.81%
BGEO Group (BGEO) 1,727.00p 6.74%
Mitchells & Butlers (MAB) 276.20p 6.23%
Ocado Group (OCDO) 259.90p 6.17%
Just Eat (JE.) 348.40p 5.45%

FTSE 250 - Fallers

Acacia Mining (ACA) 225.10p -8.01%
Circassia Pharmaceuticals (CIR) 256.80p -2.39%
Jimmy Choo (CHOO) 121.30p -2.33%
Allied Minds (ALM) 297.30p -2.33%
Zoopla Property Group (WI) (ZPLA) 215.60p -2.00%
Hastings Group Holdings (HSTG) 151.20p -1.88%
Polymetal International (POLY) 603.50p -1.87%
Rathbone Brothers (RAT) 2,124.00p -1.67%
John Laing Group (JLG) 200.80p -1.67%
Nostrum Oil & Gas (NOG) 267.30p -1.58%