The FTSE 100 ended 1.5% higher, with banks leading gains after default fears around property giant China Evergrande eased.
"We had a sell-off on the Evergrande fears and now we've rallied back. Today's major Evergrande news has given the market relief, which has pushed banks higher," said Keith Temperton, sales trader at Forte Securities.
Entain jumped 5.1% to an all-time high after the gambling firm revealed a $22.4 billion takeover proposal from Boston-based DraftKings, which was nearly double a bid it rejected from MGM this year.
Easing lockdowns and travel restrictions coupled with higher commodity prices have helped the FTSE 100 gain 1.7% so far this week to trade above the 7,000 psychological level.
Investors now await the outcome of the U.S. Federal Reserve's meeting ending later in the day and the Bank of England's rate decision on Thursday.
"I don't see the Fed doing anything particularly aggressive just yet, but the language will change, Powell has to actually say something about when taper will start," Temperton added.
Also among the gainers were Industrial metal miners, up 3.2% as copper prices surged. [METL/]
The domestically focussed mid-cap index climbed 0.7%, with Oxford BioMedica being the biggest gainer on a 50 million pound ($68.24 million) investment from Serum Institute of India..
Gains in travel and leisure stocks also supported the mid-cap index.
Over-50s holidays group Saga Plc dropped 0.1% after it warned there was still uncertainty on the longer-term impact of COVID-19 on the sector.
Imperial Leather soap maker PZ Cussons dropped 4.6% after reporting lower first-quarter revenue.
(Reporting by Shashank Nayar and Amal S in Bengaluru; editing by Uttaresh.V and Subhranshu Sahu; Editing by Alex Richardson)
By Shashank Nayar and Amal S