The blue-chip index closed 1.6% higher, but lagged its continental peers as Prime Minister Boris Johnson returned to work after recovering from COVID-19 with a warning that it was still too dangerous to relax Britain's stringent restrictions on economic activity and everyday life.

Johnson, however, added the government would outline plans to ease some measures in the coming days.

Cruise operator Carnival Plc jumped 8.6% to top the list of gainers, while Holiday Inn-owner InterContinental Hotels rose 7.1% as it raised 600 million pounds ($747 million) from Bank of England loans under the government's coronavirus aid scheme.

A rally across European banks boosted shares in HSBC, Lloyds Banking Group and Barclays.

The FTSE 100 has recovered more than 19% from its mid-March lows, absorbing trillions of dollars in stimulus measures by central banks and governments, but it still stands down more than 24% from its January peak.

"Currently, a lot of positive news have already been integrated by the market, absolute valuations are back on top of their range," Indosuez Wealth Management strategists wrote in a note.

"There is still a lot of challenges to face including potential re-acceleration in infections, negative earnings revisions...and more structurally, the risk of seeing a vicious spiral which is typical in a global recession."

Countries from Italy to New Zealand, and certain U.S. states, announced the easing of coronavirus lockdowns after nearly a month as they try to revive their battered economies.

Although its lockdown exit strategy is unclear, Britain is now seeing a downward trend in the number of people who are in hospital with the new coronavirus.

"The problem is that reopening will mean added costs to small business in creating an environment that is safe for the consumer and employees," said Edward Moya, senior market analyst at Oanda in New York.

"The easing of lockdown measures will likely only provide a limited rally here."

Britain's finance minister Rishi Sunak on Monday announced 100% state guarantees on loans to the country's smallest businesses.

The FTSE small-cap index rose 0.7%, while mid-cap shares gained 1.7%, with shares in TUI Group Europe's biggest tour operator, surging 14.3% to the top of the list of index movers.

Equipment rental firm Ashtead jumped 8.5% after saying it had raised an extra $500 million in debt to ride out the economic slump.

By Devik Jain and Sagarika Jaisinghani