Britain's top share index ended sharply higher on Wednesday as central banks moved to boost financial markets' liquidity, as commodity stocks tracked rising metal and crude prices and insurers posted strong profits.
Sentiment was also underpinned by a report showing U.S. private employers unexpectedly added jobs in July.
The commodity-heavy FTSE 100 closed 101.5 points higher at 5,420.7 after ticking up 0.1 percent on Tuesday to halt a three-session losing run.
Stocks jumped as the European Central Bank, the U.S. Federal Reserve and the Swiss National Bank announced an enhancement of their dollar liquidity-providing operations to ease credit strains that have weighed on the global economy.
The central bank actions were intended to ease persistent global financial instability as institutions write down losses from exposure to risky U.S. mortgages.
"The market has been desperately seeking some positive news after the writedowns and expected rights issues from Merrill Lynch," said Andrew Turnbull, director at Blue Index CFDs.
"We have seen recovery in a number of equities within the financial sector, with many of our clients switching out of Lloyds TSB and into a number of other banks including Barclays, which we consider was oversold yesterday."
The banking sector topped the FTSE gainers list, with Royal Bank of Scotland, Barclays, HSBC and Standard Chartered rising between 2.7 and 5 percent.
But Lloyds TSB slipped 4.7 percent after it reported a 70 percent drop in first-half profit following a $1.2 billion hit from its exposure to risky assets and warned that bad debts on mortgages were rising as house prices fall.
Standard & Poors also said that some 70,000 homeowners in Britain were currently in negative equity and that figure could rise to 1.7 million if house prices decline by a further 17 percent.
In the United States, applications for home loans slowed to their weakest pace since December 2000, while economic sentiment in the euro zone skidded in July to its lowest since March 2003.
"Although we have seen some good gains for the FTSE, it is important to not get too carried away with the positive sentiment at the moment because the 5,500/5,550 area has capped any rallies for the best part of July," Anthony Grech, market strategist at IG Index, said in a note.
INSURERS JUMP
Shares in British insurers Aviva and Admiral Group rose 8.7 percent and 10.8 percent, respectively, after posting strong first-half results.
Other insurers also gained ground, with Friends Provident rising 5.9 percent, Old Mutual gaining 4.5 percent, Prudential increasing 5 percent and Standard Life climbing 4.2 percent.
Miners rose on the broader market sentiment and a rise in key base metals prices. Ferrexpo, Anglo American, Vedanta Resources, Lonmin, Eurasian Natural Resources and Rio Tinto rose between 3.8 and 11.7 percent.
Mining group Xstrata rose 6.2 percent after posting slightly weaker output in two key metals, but forecast a strong rise in the second half.
Shares in oil and gas companies also gained with firmer crude prices. BP, Royal Dutch Shell and gas producer BG Group added between 0.8 and 2.6 percent.
Shares in British clothing retailer Next fell 1 percent after it posted a 6 percent fall in first-half underlying sales, in line with forecasts, and said it expected a similar decline in the second half amid a worsening economy.
Among other retailers, Marks & Spencer, Sainsbury and Wm Morrison slipped between 0.8 and 1.4 percent.
