The FTSE 100 was making decent gains on Monday morning in spite of Moody's stripping the UK of its prized 'AAA' credit rating, as sentiment was lifted by central-bank stimulus speculation in the US and Japan.
Over the last few days, Federal Reserve Chairman Ben Bernanke showed his commitment to the bank's third round of quantitative easing, brushing off fears that it would create economically-risky asset bubbles. The head of the St Louis Fed also said that the Fed is "going to stay easy for a long time".
Meanwhile, hopes that the Bank of Japan will appoint a new chief who favours stimulus were also boosting buying on market this morning.
However, traders were also keeping a close eye on the elections in Italy which began on Sunday.
The biggest worry for the markets is a "hung Parliament", meaning that Italy would struggle to move forward on necessary reforms and austerity measures needed to bring down the country's swollen debt. Voting closes at 14:00 London time with exit polls expected shortly after.
Ratings agency Moody's stripped the UK of its 'AAA' rating on Friday and said the growth outlook in the medium term will remain weak. The economy, which hasn't suffered a downgrade in over 30 years, is now rated at 'AA1'.
The pound took a hit against the euro when markets opened this morning, hitting its lowest level since October 2011. By mid-morning, the pound was down 0.7% at 87.57p per euro, having reached an earlier low of 87.75p.
"Right on cue, the pound fell more than a cent against the euro when the markets opened [...] But as the dust settles, many are starting to ask themselves what the fuss was about. For months the only question had been when, not if, the downgrade happened," said Glen Uniacke, head of options at forex
"It had been so heavily priced in that now it finally has, it may serve as a 'reversal indicator' - perversely easing the pressure on the pound as the uncertainty ends," he said.
Markets were also shrugging off the HSBC 'flash' manufacturing purchasing managers' index in China which fell from a two-year high of 52.3 to 50.3 in February, missing the 52.2 consensus estimate.
FTSE 100: Banks gain; Reckitt drops
Banking stocks were among the best performers this morning with RBS making gains ahead of its full-year results on Thursday. According to The Independent this morning, the bank could announce plans to float its American retail unit Citizens.
Sector peer Standard Chartered was also in demand after Nomura raised its target price by 14% and reiterated its 'buy' rating, saying that the stock's year-to-date outperformance could continue. Barclays and HSBC were also higher.
Heading the other way was consumer products giant Reckitt Benckiser which tanked after the US FDA gave the green light for two unnamed drug manufacturers to produce a generic version of its SUBOXONE tablets.
Education and publishing firm Pearson was also lower after the company announced a £150m restructuring programme and gave a gloomy outlook for the industry.
Distribution and outsourcing group Bunzl was higher after saying that full-year revenues rose 5.0% last year, helped by its "significant" acquisition spend.
Power systems group Rolls-Royce rose after being awarded a $40m contract to supply equipment and related services to power the flow of natural gas through the Uzbekistan section of the Turkmenistan-China natural gas pipeline.
FTSE 250: Senior jumps on margin improvement
Aeronautics and industrial component manufacturer Senior was a high riser after its 2012 results, as a worse-than-expected revenue performance was outweighed by higher operating margins, especially in its Flexonics division.
Insurance group Hiscox gained after revealing plans for a £200m return to shareholders. The news came as pre-tax profits climbed to £217.1m in 2012, compared with just £17.3m in the previous year.
House building peers Bovis Homes and Persimmon were both lower despite reporting impressive profit increases for last year.
FTSE 100 - Risers
Royal Bank of Scotland Group (RBS) 357.60p +3.65%
Antofagasta (ANTO) 1,123.00p +3.60%
Barclays (BARC) 316.85p +3.21%
Schroders (SDR) 2,076.00p +2.98%
Evraz (EVR) 276.40p +2.33%
Anglo American (AAL) 1,986.00p +2.27%
Polymetal International (POLY) 1,003.00p +2.09%
Kazakhmys (KAZ) 691.50p +1.99%
BP (BP.) 452.65p +1.94%
BHP Billiton (BLT) 2,133.50p +1.89%
FTSE 100 - Fallers
Pearson (PSON) 1,149.00p -5.51%
Reckitt Benckiser Group (RB.) 4,356.00p -3.54%
Reed Elsevier (REL) 687.50p -2.41%
Marks & Spencer Group (MKS) 370.70p -1.83%
Whitbread (WTB) 2,593.00p -1.48%
Croda International (CRDA) 2,555.00p -1.35%
Tate & Lyle (TATE) 797.00p -1.30%
Aggreko (AGK) 1,701.00p -1.05%
Next (NXT) 4,208.00p -0.90%
Intertek Group (ITRK) 3,367.00p -0.85%
FTSE 250 - Risers
Senior (SNR) 235.70p +6.51%
Petropavlovsk (POG) 317.70p +5.55%
Ferrexpo (FXPO) 251.30p +4.10%
Hiscox Ltd. (HSX) 517.00p +3.71%
CSR (CSR) 444.50p +2.99%
Go-Ahead Group (GOG) 1,431.00p +2.88%
London Stock Exchange Group (LSE) 1,364.00p +2.87%
FirstGroup (FGP) 191.00p +2.69%
Henderson Group (HGG) 168.80p +2.68%
Stobart Group Ltd. (STOB) 92.50p +2.55%
FTSE 250 - Fallers
Savills (SVS) 505.00p -3.81%
Bank of Georgia Holdings (BGEO) 1,340.00p -2.12%
Millennium & Copthorne Hotels (MLC) 520.00p -2.07%
Petra Diamonds Ltd.(DI) (PDL) 113.50p -1.99%
UBM (UBM) 772.50p -1.97%
Domino's Pizza Group (DOM) 527.00p -1.95%
Barr (A.G.) (BAG) 505.00p -1.94%
Raven Russia Ltd (RUS) 65.15p -1.88%
Hansteen Holdings (HSTN) 82.00p -1.74%
Genus (GNS) 1,431.00p -1.72%