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LONDON (Alliance News) - The FTSE 100 ended flat Monday, as investors ruminated over another cut to its required reserve ratio by the Chinese central bank, against weak data from the US which added to the earlier disappointment from the weekend's G20 meeting.

Having traded lower for most of the day the FTSE 100 closed up 1.08 points, at 6,097.09. The FTSE 250 ended up 0.2%, or 36.04 points, at 16,603.08 and the AIM All-Share closed up 0.1%, or 0.52 points at 692.87.

In Europe, the French CAC 40 closed up 0.9% and the German DAX 30 ended down 0.2%.

European markets were boosted Monday morning after the People's Bank of China reduced the renminbi deposit reserve requirement ratio by 50 basis points in a surprise move on Monday. The cut will be effective on Tuesday.

The reduction in reserve requirement will help to maintain adequate liquidity in the financial system, guide steady moderate growth of money and credit and boost supply-side structural reforms to improve the monetary and financial environment, the bank said in a statement on its website.

With the latest reduction, China's biggest lenders will be faced with a reserve requirement ratio of 17%.

The reduction comes after the G20 meeting of finance ministers in Shanghai over the weekend. The ministers said the global economic recovery has continued and the magnitude of recent volatility in markets had not reflected "underlying fundamentals" of the global economy.

They expect "activity to continue to expand at a moderate pace in most advanced economies," and said "growth in key emerging market economies remains strong."

Jeremy Batstone-Carr, chief economist and strategist at UK wealth manager Charles Stanley, said for all the fine words and calming efforts made by the G20 finance minister, there were no prescriptions for multi-lateral action, meaning central banks are left to fuel the recovery by themselves.

"When the PBoC leaves the G20 meeting in its own back yard and then eases the reserve ratio, to perhaps slightly weaken the yuan, it's understandable for people to worry about the health of the Chinese economy," Batstone-Carr said.

He added that the easing measures taken on Monday are unlikely to move the dial on the Chinese economy and further measures are likely in the future.

There will be more insight into the Chinese economy on Tuesday, with the official manufacturing and non-manufacturing purchasing managers' indexes at 0100 GMT and Caixin manufacturing PMI at 0145 GMT.

Mining stocks and the price of oil were supported by the Chinese monetary policy action. At the London equity market close, Brent oil was quoted at USD36.48 a barrel, higher than the USD36.12 a barrel seen at the close on Friday, and well off its earlier low of USD35.06 a barrel.

The price of gold continued its upward march, trading at USD1,233.70 an ounce at the close Monday, against USD1,216.65 an ounce on Friday.

On Wall Street at the London close, the Dow 30 was up 0.2%, the S&P 500 was also up 0.2% and the Nasdaq Composite was up 0.4%.

Data from MNI Indicators showed the Chicago-area business activity unexpectedly contracted in February. MNI Indicators said its Chicago business barometer tumbled to 47.6 in February from 55.6 in January, with a reading below 50 indicating a contraction in business activity. Economists had expected the index to drop to 53.0.

MNI Indicators Chief Economist Philip Uglow said: "If one looks beyond the gyrations seen over the past three months then trend activity has been running a little below the 50 neutral mark, highlighting continued sluggish activity levels, with manufacturers under particular pressure."

In addition, US pending home sales unexpectedly saw a notable decline in January, according to a report from the National Association of Realtors.

NAR said its pending home sales index slumped 2.5% to 106.0 in January from an upwardly revised 108.7 in December. The decrease came as a surprise to economists, who had expected pending home sales to increase by about 0.5%. With the unexpected decrease, the pending home sales index fell to its lowest level since hitting 104.5 last January.

The dollar took a hit from the weak data, and at the London stock market close the pound traded the greenback at USD1.3933, compared to USD1.3863 at the close on Friday.

The euro, however, remained weaker against the dollar, trading at USD1.0860 at the close on Monday, versus USD1.0931 on Friday.

This was because the eurozone consumer price index declined for the first time in five months in February, adding to the deflation worries of the European Central Bank, which is widely expected to announce another round of stimulus next Thursday.

Data from the Eurostat showed the flash harmonised index of consumer prices fell 0.2% year-on-year following a 0.3% rise in January, defying economist expectations for a 0.1% gain. The latest decline was the first since September and the biggest since February last year, when prices fell 0.3%.

The core HICP that excludes fresh food and energy prices rose 0.8% annually after a 1% climb in the previous month. Economists had forecast a 0.9% increase. Core inflation was the weakest since September.

"The weakening of core inflation shows the real and present danger that cheap oil will cause low inflation to become ingrained in eurozone price and wage dynamics," ING Bank economist Teunis Brosens said. "Today's weak core inflation gives doves the upper hand at next week's ECB-meeting and therefore pretty much seals the deal on additional monetary easing."

On the London stock exchange, shares in Wm Morrison Supermarkets ended up 5.1% after the supermarket chain revealed new deals with US online retail giant Amazon.com and British online grocery delivery company Ocado Group.

However, Ocado shares fell, down 4.9% on concerns over the potential threat from Amazon to its business.

Morrisons said it has struck a new supply agreement with Amazon, through which its products will be made available to Amazon Prime and Amazon Pantry customers. Morrisons will provide a wholesale supply services to Amazon, allowing customers of Amazon to access a wide range of Morrisons ambient, fresh and frozen products.

Amazon Pantry is Amazon's online food delivery service, but currently provides only packaged, non-perishable food and drinks, as well as household, health and beauty products. Fresh food can be bought from Amazon Fresh, but that service is currently only available in the US.

The deal does, however, pose further competition for Ocado, which already has an online delivery deal with Morrisons. When Amazon Pantry was launched in the UK last November, critics warned of the threat it would pose for Ocado, which has so far failed to secure an international presence with its Ocado Smart Platform.

Hiscox closed down 2.2% after the specialty insurer said it will look to retain more of its earnings to fund growth, as it reduced its special dividend and reported a lower annual pretax profit.

Hiscox said it made a GBP216.1 million pretax profit in 2015, down from GBP231.1 million the prior year, coming a touch above company-compiled consensus forecasts of a GBP214.2 million pretax profit.

The company lifted its ordinary dividend per share to 24.0 pence from 22.5p, and lowered its special dividend to 16.0p from 45.0p the prior year, taking the total payment to 40.0p. That was above analyst expectations for a 38.5p total dividend for the year.

In the economic calendar Tuesday, aside from the data from China, the Nikkei manufacturing PMI for Japan is at 0200 GMT. After the London open, there are a number of Markit manufacturing PMI readings, with France at 0850 GMT, Germany at 0855 GMT, the eurozone as a whole at 0900 GMT, the UK at 0930 GMT and the US at 1445 GMT.

Also in Europe is unemployment data from Germany at 0855 GMT and for the eurozone at 1000 GMT. Later in the day is ISM manufacturing PMI for the US at 1500 GMT.

In the UK corporate calendar, Barclays will take much of the attention when it releases full-year results at 0700 GMT. Also reporting full-year numbers are housebuilder Taylor Wimpey, insurer Direct Line Insurance Group, miners Glencore and Fresnillo, and industrial equipment rental company Ashtead Group.

Its also a busy day for mid-cap companies with full-year reports from speciality chemicals company Elementis, actuators manufacturer Rotork, office provider Regus, insurance, re-insurance and employee benefits adviser and broker Jardine Lloyd Thompson Group, price comparison website Moneysupermarket.com Group, online food delivery company Just Eat, intellectual property company IP Group, and baker Greggs.

By Neil Thakrar; neilthakrar@alliancenews.com; @NeilThakrar1

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