UPDATE 2-London stocks rebound as investors bet on central bank stimulus

Devik Jain and C Nivedita

* BP, Shell lead gains as supply cut hopes boost oil prices

* Miners rise; interest-rate sensitive banks, airlines decline

* FTSE 100 up 1.1%, FTSE 250 falls 0.2%

(Adds stock close) March 2 (Reuters) - London-listed shares bounced back in choppy Monday trade from their worst week since the global financial crisis, as investors bet on further monetary stimulus from central banks to limit the economic impact of the coronavirus epidemic.

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 and luxury goods makers

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 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 fell 1.9%, while car and auto partsfirms 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 , asupplier 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% afterBarclays raised its price target.

(Reporting by Noor Zainab Hussain and Sagarika Jaisinghani, Additional reporting by Shivani Kumaresan in Bengaluru; Editing by Vinay Dwivedi and Lisa Shumaker)