The Footsie-100 Index has closed up 81.9 at 4322.4 - its best close since July 10th.
Blue-chip stocks surged back into positive territory after markets on Wall Street fuelled a dramatic reversal in fortunes.
The Dow Jones Industrial Average slipped by 135 points in early trading in the US but recovered to stand 15 points ahead by the close in London.
Analysts said the rally had come despite a spate of profit taking and showed confidence was on the mend after the recent volatility.
Investors even brushed aside news that fallen US telecom giant WorldCom had uncovered $3.3 billion more in bogus accounting.
It was another good day for banks with Lloyds TSB up 29p at 598p, Barclays up 18p at 466p, HSBC up 5p at 750p and Royal Bank of Scotland up 20p at £15.60.
GlaxoSmithKline and AstraZeneca were also making progress, rising 16p and 51p to close at £13.75 and £24.06 respectively.
PA