London's leading index bounced back into the black yesterday after a strong opening on Wall Street eased concerns over US and eurozone debts.
The FTSE 100 Index closed up 155.6 points at 5163 after another rollercoaster day that saw the market open up 150 points, sink into the red and rally again when US markets opened.
The improved mood helped the pound, which rose to 1.632 against the dollar, while sterling held steady against the euro at 1.139.
Investor confidence was bolstered when the Dow Jones Industrial Average rose by nearly 300 points after the number of people signing up for unemployment benefits in the US last week fell below 400,000 for the first time in four months.
The news helped to ease jitters caused by rumours regarding the health of the French banking sector.
Some of those fears were quelled when France's biggest bank, Societe Generale, asked the regulator to investigate the rumours which are surrounding it, claiming they are unfounded.
Talk of a short-selling ban also gave a boost to financial shares. Panic has descended on world markets in recent days amid fears that the twin debt crises in the eurozone and the US will lead the world back into recession.
The Dow Jones Industrial Average tumbled nearly 5% after a short-lived relief rally caused by the Federal Reserve's two-year pledge of low interest rates was overtaken by fresh eurozone debt worries.
Indeed, growing fears over France's debt rating caused the FTSE 100 Index to slump 157 points yesterday.
But with Asian markets showing resilience the top flight staged an increasingly assured recovery as the day wore on.