Britain's leading share index surged 2.6 percent early on Thursday, recovering some of the previous session's hefty losses, as beaten-down banks and commodity stocks rebounded.
By 0753 GMT, the FTSE 100 was up 114.0 points at 4,480.7, after tumbling 5.2 percent on Wednesday to its lowest close in over four years, shrugging off UK government's rescue deal and coordinated rate cuts by top central banks.
The UK benchmark is still down 30 percent this year.
Banks rose, with the FTSE 350 banks index up 3.4 percent. Citigroup said it had raised UK banks to "neutral" from "underweight" after their underperformance and the government's rescue plan as well as coordinated rate cuts from major central banks.
Royal Bank of Scotland, Lloyds TSB and HBOS were up between 10.5 and 25.2 percent. But HSBC slipped 0.4 percent.
Barclays was flat after the Daily Mail said the bank is hatching a plan to bolster its capital base by 3 billion pounds ($5.17 billion) by offering existing investors first refusal on preference shares before seeking cash from the government's rescue fund.
"There is slight enthusiasm for more … capricious stocks against defensive stocks at the moment. It's a good signal but the real clue will be from how convinced they are and what they are going to say at the G7 meeting," said Stephen Pope, chief global market strategist at Cantor Fitzgerald Europe.
Financial ministers and central bank chiefs from the G7 countries will meet in Washington on Friday.
"I would expect that where you can find them, make short-term gains, where you can, make some profits and try to book those very quickly. I wouldn't expect gains to be long-lived," Pope said.
He said the trick of the market would be to keep a close eyes on U.S. futures, which were up 1.8 to 2.2 percent.
Aviva surged 7.9 percent after the insurer said it had reinforced its buffer against slumping stock markets through increased hedges.
U.S. stocks fell for the sixth straight session on Wednesday, as a coordinated worldwide cut in interest rates failed to alleviate fears about a global recession. In Asia, Japan's Nikkei average down 0.5 percent, reversing earlier gains.
The New York Times said the U.S. Treasury Department is considering taking ownership stakes in many U.S. banks in a bid to restore confidence in the badly shaken financial system.
In Iceland, financial watchdog said it was taking control of the country's biggest bank Kaupthing, the third such takeover in a week, in order to safeguard the domestic banking system.
Energy stocks were in demand despite crude prices falling below $88 a barrel. BP, Royal Dutch Shell, BG Group and Cairn Energy were up between 3 and 11.5 percent.
Energy services company John Wood Group advanced 4.2 percent after it said trading performance had been strong for the year and expected its growth to continue.
Miners also bounced, with BHP Billiton, Rio Tinto, Anglo American, Eurasian Natural Resources, Antofagasta and Vedanta Resources rising 5 to 11.8 percent.
Mexican miner Fresnillo, however, shed 1.9 percent despite posting a 3.5 percent rise in third-quarter silver output and saying it was on target to meet its 2008 target.
Defensive sectors like tobacco and utilities eased, with Imperial Tobacco and Scottish & Southern Energy slipping 0.5 and 2.1 percent, respectively.
