Update: The FTSE 100 rallied on Monday despite recession fears continuing to stalk the market, prompting investors to flee cryptocurrencies and oil to pull back from highs earlier in the month. 

The blue-chip index was trading up 1.6%, or 111 points, at 7,127, shortly before 3pm. That bounce brought the index some way off the 7,000 threshold – a psychological marker it hasn’t hit since Russia’s invasion of Ukraine – but leaves a long way still to make up after last week’s bruising 4.1% decline. 

Susannah Streeter, senior investment analyst at Hargreaves Lansdown, said investors were nervous about ‘the realisation the comfort blanket of cheap borrowing is being whipped away’ as central banks continue to push interest rates rapidly higher.

‘Investors sense there is trouble ahead for the world economy, given that the priority of the powerful US Federal Reserve is to stamp out the flames of inflation even if that means extinguishing growth,’ she said.

Bitcoin fell below $17,600 (£14,360) over the weekend and was struggling to hold on above $20,000 as investors flee risky assets, while a barrel of Brent crude oil is back below $113 on ‘expectations of lower demand for oil as economies slow’.

Streeter said that was unlikely to translate into savings at the petrol pump as the price of oil is still 40% higher than six months ago and supply is still a worry given the ongoing war in Ukraine.

‘Uncertainty about the global outlook is also weighing on miners and commodity firms with Rio Tinto (RIO), Anglo American (AAL), Antofagasta (ANTO), and Glencore (GLEN) among the fallers in early trade on the FTSE 100,’ she added.

Neil Wilson, analyst at Markets.com, said the focus this week will be on Fed chair Jerome Powell’s two-day testimony in Congress.

‘Expect the Fed chair to reiterate the central bank’s desire to tamp down inflation, which keeps headline risk elevated,’ he said.

The biggest riser this morning was BT (BT), which added 3.1%, or 5p, to trade at 185p. British Airways owner International Consolidated Airlines (IAG) followed, added 3% to trade at 115p, while widely held global trust Scottish Mortgage (SMT ) moved 2.7% higher to 711p after closing last week on a wide 16% discount.

HSBC (HSBA) also performed strongly as the day went on, with the shares up 6.2% by mid-afternoon at 540p. 

After a more lacklustre opening, the FTSE 250 made a more modest gain of 0.3%, or 53 points, to reach 18,979 despite soaring Euromoney Institutional Investor (ERM) shares. The publisher rocketed 24.5%, or 268p, to £13.62 in morning trading as it became the latest UK-listed target of private equity, as groups Astorg and Epiris approached the group with a £1.6bn offer.

The business-to-business media group said it had received a number of approaches from the private equity consortium and said there is no certainty a deal will be done.

Travel stocks also bounced on the mid-cap index, with cruise operator Carnival (CCL) up 6.5%, or 44p, at 718p, and package holiday group Tui (TUI) up 4.1%, or 6p, at 159p.

Buybacks lift Blackstone

Among other investment trusts, Blackstone Loan Financing (BGLF ) gained 2.7% to €0.78 as it began a programme of share buybacks that will last until 27 July to narrow its stock’s 22% discount to net asset value.

BMO Global Smaller Companies (BGSC ) slipped 1% to 140.4p on a 9% discount after unveiling annual results showing a flat -0.2% investment return for the year to 30 April, beating the 3.2% decline in its benchmark, and announced a 52nd annual increase in its dividends, up 5.1% to 1.84p per share.

Among closed-end fund risers and fallers, Henderson Diversified Income (HDIV ) was in favour, rising 3.6% to 68.6p, and JPMorgan China Growth & Income (JCGI ) added nearly 3% to 416.5p.

But Baillie Gifford China Growth (BGCG ) fell 3.4% to 310.2p, and JPMorgan US Smaller Companies (JUSC ) slid 3.1% to 340p.