The FTSE 100 has closed up 134.6 at 4131.0.
Speculation of an interest rate cut in the US fuelled buying activity in the City.
The Footsie had slumped below the 4000 barrier earlier in the session on the back of the previous night's losses on the US markets.
Traders said investors were increasingly confident the Fed may cut rates in the US next week and more money was now coming into the market.
Banking stocks were among the risers in the City despite recent concern over bad debts with Barclays up over 6 per cent, or 26p to 436p.
Lloyds TSB closed 19.5p higher at 591.5p.
Late buying also pushed Royal Bank of Scotland up by over 6 per cent, or 90p to £15.30, ahead of its first-half numbers tomorrow.
Vodafone shot ahead by over 6 per cent, or 5.5p to 95p, while mmO2 moved up 2.75p to 41.5p.
BP and Shell also powered ahead aided by stronger oil prices with BP up 20.5p to 494p, and Shell 17p higher at 423p.
An upgrade from Goldman Sachs helped put steel group Corus on top of the FTSE leaderboard, up almost 15 per cent, or 6.75p to 52.25p.
PA