British shares snapped a three-day losing streak on Monday after Russia said it would pull troops back from near the Ukrainian border which investors interpreted as a sign of easing tensions between Moscow and Kiev. Late on Friday, Moscow's Defence Ministry said it had ended military exercises in southern Russia which the United States had criticised as "provocative".
In spite of this, Nato chief Anders Fogh Rasmussen said on Monday he saw a "high probability" that Russia could intervene militarily in eastern Ukraine and that Nato detected no sign that Moscow was pulling back thousands of troops from close to the Ukrainian border. But there was no apparent market reaction to those comments. Fears that Russia could invade eastern Ukraine and tit-for-tat sanctions between Moscow and the European Union have weighed on stock markets over the past month. That compounded worries about widening conflict in the Middle East, weak European economic data and the prospect of tighter US monetary policy.
"It's very early to start celebrating and you've still got the negative effects of the sanctions, which are likely to filter through over the coming months," Michael Hewson, chief market analyst at CMC Markets UK, said. "But anything that ratchets down the tension is always going to be an opportunity (for) ... a little bit of bargain hunting." The FTSE 100 closed up 65.46 points, or 1 percent, at 6,632.82 points, bouncing from oversold territory after a 3.3 percent fall over the previous two weeks. Trading volume, however, stood at only around three quarters of the 90-day daily average.
The broader FTSE 350 index, which also includes small caps, was up 1.1 percent. It had fallen for three straight sessions as well. Mid-cap chemical firm Synthomer was the top riser on the FTSE 350, up 8.3 percent, as it increased its interim dividend to 3 pence from 2.4 pence a year earlier. "One positive in the announcement is confirmation of a more generous dividend policy," analysts at N+1 Singer wrote in a note. "A special (dividend) would also be considered if the Group ends up with surplus cash, which it is likely to, given the current land disposal process in Malaysia."