LONDON: British shares bounced back strongly on Monday after a tough week thanks to a relief rally in commodities stocks.
But with market volatility tipped to stay elevated, investors were divided over whether to 'buy the dip'
The FTSE 100 was up 1.3 percent by 0930 GMT, clawing back some of last week's losses but still near a 13-month low. Some 147 billion pounds was wiped off the leading UK stock index in the past two weeks as heady markets nosedived.
Energy, materials and financials provided the biggest boost to the FTSE 100 as the cyclical stocks that had suffered the worst losses last week rebounded to lead the market.
Oil majors Royal Dutch Shell and BP rose 1.8 and 2.1 percent respectively, as crude prices also climbed back up from last week's steep declines.
Miners Anglo American, Glencore, BHP Billiton and Rio Tinto led gainers, with steel producer Evraz top of the FTSE, up 6 percent, as metals prices brightened.
Wary of calling a relief bounce too soon, some investors said they were staying on the sidelines while the market mood developed.
"If anything we will be looking to sell into rallies rather than buying into dips," said Daniel Lockyer, senior fund manager at Hawksmoor Investment Management.
"What's changed I think is the psychological element of markets where just a month ago everyone thought it was a market that only went up and volatility always stayed low. You just needed to have a couple of down days and spikes in the VIX to change that mentality."
While many on both the sell- and buy-side recommended "buying the dip" in stocks last week, arguing growth remained strong and European valuations were still relatively attractive, investors seemed reluctant to make assertive bets with volatility still high.
"We will wait a few more days to see where markets will stabilise before implementing an overweight in our portfolios," said Valentin Bissat, European equity strategist at Mirabaud Asset Management. He remained supportive on equities.
The FTSE 250 gained 1.1 percent, with some big moves on broker notes and results.
Victrex shares jumped 5 percent, the top European gainer after the mid-cap polymer firm got a double upgrade from Bank of America Merrill-Lynch to 'buy'.
Tourism and insurance group Saga gained 3.8 percent after it said it had signed a quote share deal with NewRe and German reinsurer Hannover Re.
Bucking the trend in the mining sector was Acacia Mining , down 8 percent and the worst-performing mid-cap stock after scrapping its 2017 dividend.
Tanzania's largest gold miner also said full-year core earnings dropped by more than a third due to a ban on unprocessed mineral exports in the country.
Small-cap UP Global Sourcing sank 41 percent after a trading update which Shore Capital analyst Darren Shirley called 'disappointing".
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