Britain's top share index was up 6.3 percent by midday on Tuesday, extending the previous session's sharp gain, with Washington set to unveil a $250 billion injection into its banks, further easing market anxiety.
The gains came after the FTSE 100 posted its second best one-day percentage rise ever on Monday. The benchmark plummeted 21 percent last week — the index's second worst weekly fall ever — on liquidity strain and global recession fears.
By 1052 GMT, the FTSE 100 was up 265.9 points at 4,522.8. The index is still down 30 percent for the year, however.
Beaten-down banks were among the standout gainers, with the FTSE 350 banks index up 3.7 percent.
Barclays, Royal Bank of Scotland, HSBC and Standard Chartered put on 2.2 to 11.7 percent.
Following similar measures in Europe, the U.S. Treasury is due to unveil its plan at 1230 GMT with about half of the $250 billion likely to go to the top nine U.S. banks to get them lending to each other again, people familiar with the plan said.
"It does seem that the coordinated move by governments seems to have done the trick. They have pulled a little bit of money back into the market. I suppose it's a little bit of wait-and-see," said Mark Priest, a senior trader at ETX Capital.
"We have seen what these markets can be when they are not happy," he said.
"Everybody is a bit wary of just giving away free money because we have seen what it can lead to."
The expected announcement lifted Asian and European stocks, with Japan's Nikkei average surging over 14 percent to post its biggest one-day gain in its 58-year history.
The Dow Jones industrial average rose 11 percent overnight, its biggest one-day point gain ever and its biggest percentage gain since March 15, 1993.
Insurers were also in demand, with Old Mutual adding 8.3 percent, Prudential climbing 5.7 percent and Aviva advancing 6.8 percent.
Hedge fund Man Group strengthened 7.9 percent, while interdealer broker ICAP leapt 13.6 percent.
Financials have been boosted by a sense that a frozen credit market may be starting to thaw, but analysts said more monetary easing, in addition to a coordinated 50 basis-point rate cuts by major central banks, would be needed.
"The most important thing is to get money markets working again," said Neil Parker, market strategist at Royal Bank of Scotland.
"If we can do that, with a combination of the measures that have already been put in place and further interest rate cuts from the central banks, then we could be reaching a turning point."
LIBOR three-month dollar rates slipped to 4.635 percent from 4.7525 percent on Monday. British consumer price inflation hit a 16-year high of 5.2 percent in September, but Bank of England policymakers had anticipated the rise which is unlikely to stand in the way of further rate cuts.
SHINING METALS, SLICK CRUDE
Commodity stocks were the top-weighted gainers as crude prices rose by $3 a barrel to trade above $84 and metal prices gained.
BP, Royal Dutch Shell, BG Group and Cairn Energy advanced between 5.7 and 9.2 percent.
Among miners, Eurasian Natural Resources, Anglo American, BHP Billiton, Rio Tinto, Vedanta Resources and Antofagasta tacked on 5.2 to 13.2 percent.
Cadbury rose 6.2 percent after the confectionery group reported a 6 percent rise in third-quarter underlying sales as it announced a further 580 job cuts to keep it on track to meet its annual sales and profit margin goals.
