Britain's top shares closed 2.2 percent higher on Tuesday led by strength in banks and commodity shares but finished below a four-month peak hit early on as Wall Street ran into some profit-taking.
At the close the FTSE 100 was 93.72 points firmer at 4,336.94, catching up with gains made by its continental European and U.S. peers in the previous session when London was closed for a public holiday.
The UK index was still down around 1.7 percent for the year after rallying 26 percent from a six-year low hit on March 9.
"The London index has started the week with a flourish, playing catch-up with yesterday's good news … Admittedly this has proved difficult to sustain with traders on Wall Street finding themselves wary to push much higher," said Jimmy Yates, head of equities at CMC Markets.
UK banks were the best performers in London as investors bet that the sector's capital shortfalls, as measured by upcoming U.S. stress tests, may be manageable.
Lloyds Banking Group, Royal Bank of Scotland, L, HSBC, and Barclays gained between 10.5 and 6.8 percent.
Standard Chartered gained 8.5 percent after the Asia-focused bank reported record first-quarter income and profit, shrugging off a global financial crisis.
A source familiar with official talks said U.S. regulators had deemed that about 10 of the 19 U.S. banks being stress tested would need to raise more capital.
The banks will be briefed on Tuesday on the final results which will be published on Thursday.
"Justifiable though the market recovery is there are some huge bumps ahead. Thursday may be one of those big bumps, with the devil in the details of what U.S. banks require," said Howard Wheeldon, senior strategist at BGC Partners.
Within the wider financial sector, insurer Prudential added 10.2 percent, while its peers Aviva and Standard Life rose 6.4 and 4 percent respectively.
But U.S. blue chips were down 0.2 percent by London's close after a 2.6 percent advance on Monday led by banks. The U.S. Institute for Supply Management severely downgraded its projections for economic activity and investment during 2009, in both the manufacturing and services sectors.
The U.S. economy is on track for a recovery later this year, but the pick-up is likely to be sluggish and the jobless rate is likely to rise further, Federal Reserve Chairman Ben Bernanke said on Tuesday in prepared testimony to the congressional Joint Economic Committee.
MINERS, OILS STRONG
Miners saw good demand following positive economic news from China on Monday which hinted at recovery for the major commodity consumer, with Vedanta Resources, Kazakhmys, Eurasian Natural Resources, Anglo American and Antofagasta up between 3.5 and 11.5 percent.
Xstrata added 2.6 percent after the miner posted a 7.7 percent rise in first-quarter coal production, its most profitable commodity, but output of many other products declined amid weak demand and low prices.
Societe Generale said it was overweight on basic resources "given sound value and good correlation with (bottoming) commodity prices."
Oil majors moved higher as crude prices held around $54 a barrel, with BP, Royal Dutch Shell, and BG Group ahead by between 1.1 and 1.5 percent.
British Airways was the top blue chip performer, up 12.1 percent after recent falls on worries over the impact of swine flu on the travel sector, with Thomas Cook Group and TUI Travel ahead 8 and 7.2 percent respectively.
But GlaxoSmithKline shed 1.3 percent having been boosted last week by demand hopes for its flu drug.
And defensive attractions were shoved aside as some risk appetite returned, with British American Tobacco losing 1.5 percent, Scottish & Southern Energy down 2.3 percent, and Wm.Morrison Supermarkets off 3.4 percent.
