Relief over emergency measures to prop up the euro and prevent Greece's debt crisis spreading across Europe sent London's FTSE 100 soaring more than 5% yesterday.
Global markets rallied after a €750bn (£650bn) package including loan guarantees, funding and a commitment from the European Central Bank to buy government bonds.
The Footsie rose 264.4 points to 5387.4, or 5.2%, in its best day since December 2008 as the Conservatives and Liberal Democrats continued to push for an agreement to ease fears of political paralysis following the election.
The Footsie's revival comes after its 2.6% slide on Friday and its worst week for 18 months. The pound also recovered to near 1.50 against the dollar after falling to 1.44 before the weekend.
Elsewhere, Wall Street's Dow Jones Industrial Average pushed more than 3% higher, while Hong Kong's Hang Seng and Japan's Nikkei 225 rose 2.5% and 1.6% respectively.
Even bigger gains were seen in Europe with France's CAC 40 more than 8% higher and Germany's Dax up nearly 5%.
Investors were cheered by the deal to prop up the single currency - backed by the eurozone nations and the International Monetary Fund - following weekend talks.
Central banks, including the Bank of England, also made moves to oil money markets in danger of seizing up by restarting liquidity measures last seen in the financial crisis.
Financial stocks hit hardest by the turmoil of last week made stellar advances, led by Barclays, which soared more than 16%.
It was followed close behind by Lloyds Banking Group and Royal Bank of Scotland, which both added almost 14%. In all, 10 blue-chip stocks made double-digit gains on the day.
Anthony Grech, head of research at IG Index, said: "Banks have been the biggest winner as this package removes the vast majority of risk seen with sovereign debt defaults - the move has also injected a degree of confidence into the global economy."
He added: "The fact that the UK Government remains technically in disarray doesn't seem to be too much of a distraction."