Britain's leading share index snapped a three-day losing run to close up on Monday as miners benefited from firmer metal prices, while beaten-down real estate stocks were lifted by news of a new property fund. The FTSE 100 ended up 13.7 points, or 0.25 percent at 6,215.7, after losing 2.3 percent last week.
The UK benchmark index has lost 3.7 percent so far this year on concerns over the possibility of the United States sliding into recession. European shares also ended higher for the day. US stocks rose, rebounding from last week's losses and after IBM reported higher-than-expected preliminary results.
Property stocks bounced strongly from near their lowest levels in 32 months on weekend news that UK hedge fund Laxey Partners wants to raise 1 billion pounds ($1.96 billion) in debt and equity for a new fund to invest in the sector, traders said.
"In the likes of real estate investment trusts, we have some attractive yields and big discount to net asset value. The stock market has anticipated to a great degree what's probably going to manifest itself now to the next two years in the physical market," said Tim Whitehead, head of portfolio services at Redmayne-Bentley.
"There is definitely some bottom fishing going on in the property sector." The FTSE 350 real estate index was up 6 percent, led up sector heavyweight Land Securities, British Land, Hammerson and Liberty International, which rose between 3.7 and 9.3 percent each.
But commodity shares were the biggest sectoral gainers as raw materials prices firmed. BHP Billiton, Anglo American, Xstrata, Lonmin and Kazakhmys added between 1.2 and 2.7 percent. "The expectation is that the Fed will cut interest rates ... That should help with confidence in investors' minds," said Henk Potts, equity strategist at Barclays Stockbrokers.
Banks were mostly stronger, with Barclays up 3.2 percent, Royal Bank of Scotland gaining 1.7 percent, and both HBOS and Alliance & Leicester adding 0.8 percent. Investors will eye quarterly earnings from Citigroup, Merrill Lynch and J.P. Morgan this week for further clues on the impact of the credit market turmoil on global financial institutions and on the wider economy.
The Financial Times reported that Merrill was seeking about $4 billion in a second capital raising and the Kuwait Investment Authority is expected to be a significant investor in the deal. The paper also reported that Citigroup was putting the final touches to a second big fundraising, seeking up to $14 billion from Chinese, Kuwaiti and other investors.
A Credit Suisse sectoral downgrade on the European telecoms sector weighed on Vodafone, Cable & Wireless and BT Group. Index heavyweight Vodafone fell 1.8 percent, while C&W and BT lost 2.3 and 1.8 percent, respectively.
Food retailers also suffered after Morgan Stanley cut its rating on Tesco, Britain's largest supermarket group, to "underweight" from "overweight". Tesco, which is due to issue its trading statement on Tuesday, shed 1.4 percent.
News and information group Reuters lost 1.7 percent after ABN Amro cut its rating on the stock to "sell" from "hold" and trimmed its price target to 550 pence from 675 pence. Shire dropped 3.2 percent after Merrill Lynch downgraded its recommendation on the drugmaker to "neutral" from "buy".