Commodity-linked stocks push FTSE 100 higher

By Shashwat Chauhan and Shristi Achar A

(Reuters) -London stocks ended higher on Monday, reversing earlier declines as investors digested Swiss lender UBS's weekend deal to rescue rival Credit Suisse, while gains in mining stocks helped the commodity-linked FTSE 100.

The blue-chip FTSE 100 rose 0.9%, after hitting its lowest level in more than four months in the session, while the mid-cap FTSE 250 eked out 0.1% gain.

"There is a bit of a relief rally going on in stocks which saw heavy losses in last week," said Chris Beauchamp, chief market analyst at IG Group.

"The sell-off this morning gave way to a rebound as people look at (UBS-Credit Suisse deal) in a more calm fashion."

Industrial metal miners rose 3.4%, with Glencore Plc jumping 3.9% after BofA Global Research and UBS upgraded the metal miner to "buy."

Strength in metal prices as the dollar weakened added to the sector's gains. [MET/L]

Precious metal miners jumped 4.3%, tracking strength in gold prices as investors fled to the safe-haven metal. [GOL/]

British banks however, lagged and closed down 0.5%. The index pared declines after slumping as much as nearly 6% during the day.

"The scale of the response from central banks at the weekend acknowledges gaps in the system, which will leave many investors unwilling to revisit financial stocks until such time as the full extent of the problem is known," said Richard Hunter, head of markets at interactive investor.

The FTSE 100 recently gave up its year-to-date gains, to fall 0.6% on the year, as fears of a meltdown in the global banking sector dented investor sentiment.

Investors now await the U.S. Federal Reserve policy decision and February UK inflation data due on Wednesday, to gauge the state of the economy before the Bank of England's (BoE) interest rate decision later this week.

Traders are evenly split between a 25 basis-point hike and the BoE keeping rates at the current level on Thursday. <0#BOEWATCH>

Meanwhile, Goldman Sachs said it saw no economic growth in the UK this year and no longer expects BoE to hike its policy rate in May.

(Reporting by Shashwat Chauhan and Shristi Achar A in Bengaluru; Editing by Savio D'Souza, Subhranshu Sahu and Richard Chang)