The blue-chip FTSE 100 closed up 1.1%, after falling to its lowest level since 2016 on Friday, while the mid-cap index ended a volatile day of trading 0.2% lower

London's main index was pushed higher by supermarket firms Ocado, Sainsbury's and Morrisons after Ocado advised customers to place orders further in advance because of "exceptionally high demand", indicating a possible reaction from shoppers to the spreading coronavirus outbreak.

British Prime Minister Boris Johnson said the country needed to be prepared for the coronavirus to spread further and would announce its main action plan for responding to the outbreak on Tuesday.

The bluechip index was also boosted by oil majors BP Plc and Royal Dutch Shell Plc as hopes of a supply cut boosted oil prices.

Miners <.FTNMX1770> and luxury goods makers <.FTNMX3760> rose between 3% and 2.4%, after being hit last week in a worldwide sell-off that erased more than $5 trillion from equity markets.

But interest-rate sensitive banks <.FTNMX8350> lagged the wider rally on Monday, as investors expected central banks to slash rates after data showed China's factory activity being battered by the health crisis, which has infected more than 87,000 people and killed more than 3,000.

"Equity markets have become overly dependent on central banks coming in anytime things look a bit shaky and essentially throwing money at the problem - cutting interest rates, government bond buying schemes," CMC Markets analyst David Madden, said.

"If we have a health crisis whereby people, towns, cities are locked out or in quarantine, how is an interest rate cut really going to encourage people to go out and borrow and spend more money?" he added.

The CME Group's FedWatch Tool now assigns a 100% chance that the Fed will lower borrowing costs at its two-day meeting concluding on March 18.

Airlines <.FTNMX5750> fell 1.9%, while car and auto parts firms <.FTNMX3350> ended the day 8.31% lower as dealers took the view that travel would be greatly diminished on account of the coronavirus taking hold in Europe.

British Airways-owner IAG fell 8.2%.

In news-driven moves, mid-cap firm Senior, a supplier to Boeing jumped 4.9% after saying it was taking firm action to restructure its business and ensure a return to growth in 2021.

Insurer Hiscox rose 4% after it said it had received small claims related to the outbreak as a pandemic is only covered in a very small part of its portfolio.

Drugmaker Hikma Pharmaceuticals rose 6.2% after Barclays raised its price target.

By Devik Jain and C Nivedita