The FTSE 100 Index closed 125 points higher at a three month high of 5787.3, meaning £31.7 billion was added to its value in today's rally.
World markets surged higher after 163,000 jobs were created in the United States last month, which was significantly more than forecasters expected and helped ease fears about the strength of the economy following three months of sluggish hiring.
The figures settled investors' nerves after markets fell sharply yesterday when European Central Bank boss Mario Draghi failed to take action to stem the crisis, despite having raised hopes by promising to do whatever it takes to save the euro.
The FTSE 100 Index rose 2 per cent, putting it on course for its highest close for three months.
Markets in France and Germany surged 3 per cent while the Dow Jones industrial average in the US was up 1.5 per cent.
There has been mounting evidence of a slowdown in the global economy in recent months, with US GDP having slowed to 1.5 per cent in the second quarter of 2012, while the eurozone debt crisis has intensified.
Today's figures gave hope that the US economy was recovering rather than falling back into recession.
However, data has been mixed in recent weeks and even today's job figures were accompanied by a rise in the unemployment rate to 8.3 per cent, but this was largely overlooked by traders.
Colin Cieszynski, market analyst at CMC Markets, said: “All the disappointment and hand wringing over the lack of central bank action this week was all blown away by the very strong US jobs report.
”This strength confirmed that while not growing as fast as some would like, the US is not falling off a cliff either.“
Markets also took some heart from Mr Draghi's pledge to devise a plan to help lower the borrowing costs of debt-ridden countries.
Spain's borrowing costs have risen in recent weeks above the 7 per cent level that has pushed other countries into seeking a bail-out, but they eased today as traders digested his comments.
The rally on London's leading shares index was despite a worrying survey that the powerhouse services sector had showed its weakest growth for 19 months in July, suggesting the UK economy is at its lowest ebb for three years.
Encouraging jobs figures from the world's biggest economy helped investors shrug off disappointment about a lack of action to tackle the eurozone debt crisis today.