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% today.
Global markets rallied after a 750 billion euro (£650 billion) 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 ten 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 as a whole, with the bulk of commodity prices finding support."
He added: "The fact that the UK Government remains technically in a state of disarray doesn't seem to be proving too much of a distraction."
The shares surge left all but two of the FTSE 100's companies in positive territory.
Oil giant BP, which has been hit by a major oil spill in the Gulf of Mexico, lost ground after revealing clean-up costs are running at 350 million dollars (£234 million) so far.
After being hit by a major sell-off last week, the euro climbed to almost 1.31 against the dollar at one point before giving back some of the ground. Sterling fought back to near 1.17 against the single currency after slipping as low as 1.14 earlier during a volatile session.
ING Bank analyst Carsten Brzeski praised the EU and the IMF for their "aggressive" action in tackling the sovereign debt crisis posed by Greece, which threatened to spread to other countries such as Portugal and Spain.
He said: "Eurozone policymakers surprised probably even the most optimistic observers by presenting a quick and forceful, unprecedented crisis package.
"It does not solve the fundamental fiscal problems but it gives countries now several years for swift action."Reuse content