The benchmark FTSE 100 soared 2.3%, its biggest one-day percentage gain in nearly a year, while the midcap FTSE 250 surged 1.9% and hit a new all-time high. Both moves followed hefty gains in the previous session.
Markets breathed a sigh of relief after U.S. Trade Representative Robert Lighthizer said a 'phase-one' trade deal with China was "totally done", boosting trade-exposed UK stocks including HSBC, Burberry and miners.
Meanwhile, domestically focussed stocks continued to benefit from the British election euphoria, with banking big shots Lloyds, Barclays and RBS jumping between 3.7% and 5.5%.
Victory for Johnson's Conservative Party has reassured markets that Britain is likely headed for a swift exit from the European Union, dispelling some uncertainty after 3-1/2 years of political chaos.
"You are going to have a combination of both international investors putting money into the UK market ... plus within the UK you are going to have more commitment of capital to projects and businesses than we've had previously," said Scott Thiel, chief fixed income strategist at BlackRock Investment Institute.
Tobacco firm BAT was the biggest blue-chip gainer after Bank of America Global Research handed the stock a rare double upgrade.
Notable news-driven moves were limited to midcaps.
Mike Ashley's Sports Direct leapt 31%, its biggest ever one-day gain, after the retailer, which will change its name to Frasers Group, forecast core earnings growth of as much as 15% this financial year .
Tullow Oil, which lost more than half its value last week, dropped 10% after ratings agency S&P Global cut its long-term credit rating and HSBC downgraded the stock.
Cineworld ended 2.5% higher. The cinema operator had earlier shed nearly 9% after announcing a $2.1 billion takeover of Canada's Cineplex to be financed by raising more debt, which analysts said had made investors uneasy.
Graphic - Sports Direct lags rival JD Sports this year: https://fingfx.thomsonreuters.com/gfx/mkt/12/10038/9949/spd.png
(Reporting by Shashwat Awasthi and Muvija M in Bengaluru, Editing by Sherry Jacob-Phillips and Mark Potter)
By Shashwat Awasthi