London’s FTSE 100 was among the global markets to rally strongly on Wednesday.
Monday dire trading was firmly behind traders as sentiment turned sharply positive due to improving hopes over the economic outlook.
London’s top index recorded its strongest trading day for around four months as banking firms performed well.
The FTSE 100 finished 140.19 points, or 1.75%, higher to end the day at 8,166.88.
European traders were eased after Japan’s central bank helped calm concerns regarding carry trades.
The Cac 40 in France ended 0.27% lower and the Dax index was up 0.09% at the close.
Chris Beauchamp, chief market analyst at IG, said: “The disorderly sell-off of Monday’s session has been replaced with more gains for stocks and a continued decline in the volatility index, a sign that things continue to calm down.
“The light macro and earnings calendar this week has proved to be an unexpected blessing, giving investors space to reassess their outlook on the next few months.
“However, it might not take much to tip them into risk off mode again, particularly if signs of a fresh unwind in the yen trade rear their head.”
Stateside, the US markets took their cues from Europe to open firmly higher despite weak reactions to updates from Disney and AirBnB.
Meanwhile, sterling regained ground after slipping to a month-low against the dollar in the previous session.
The pound was up 0.13% at 1.270 US dollars, and was up 0.22% at 1.163 euro.
In company news, Vodafone shares made gains after the telecoms company said it will hand 500 million euro (£430 million) back to shareholders over the coming months.
It comes after Vodafone committed to return two billion euro to shareholders in March, after selling its Spanish business earlier this year.
Vodafone finished the session up 3.9% at 73.2p.
Marketing giant WPP was in the red after it agreed to sell its stake in FGS Global for around 775 million US dollars (£610 million).
The company revealed a slight increase in revenues to £7.2 billion for the first six months of the year while operating profits dipped.
Shares in WPP were down 1.9% at 703p at the close.
Legal & General was higher at the close after it revealed stronger-than-expected profits and raised its dividend, as it pushes ahead with a major overhaul.
Shares in the asset management and insurance firm rose 1.3% to 219.5p after revealed adjusted operating profits of £849 million for the first half of the year.
Hiscox dipped after the insurance firm said its is bracing for a 28 million dollar (£22 million) hit from the collapse of the Baltimore bridge as profits also missed guidance. Shares were 1.8% lower at 1,148p.
The price of oil recovered a three-day high amid recovering hopes of energy demand whilst volatility in the Middle East continues.
A barrel of Brent crude oil was up by 2.5% to 77.5 US dollars (£60.97) as markets were closing in London.
The biggest risers on the FTSE 100 were Entain, up 19.8p to 523.4p, Vodafone, up 2.76p to 73.2p, Pershing Square, up 130p to 3,618p, Natwest Group, up 11.6p to 334.6p, and Lloyds, up 1.84p to 57p.
The biggest fallers on the FTSE 100 were WPP, down 14p to 703p, Intercontinental Hotels Group, down 136p to 7,274p, CocaCola HBC, down 42p to 2,698p, easyJet, down 5.2p to 418.9p, and Rightmove, down 5.8p to 518.4p.