A pledge from the president of the European Central Bank (ECB) to offer unlimited funds to lower debt-ridden countries' borrowing costs triggered a 2% surge on the London market.
ECB boss Mario Draghi announced plans to buy bonds in a move designed to take the pressure off struggling nations, giving them more breathing space to repair their finances.
Although the measures were expected, the FTSE 100 closed more than 2% higher, or 119.5 points at 5777.3, while European markets were even more bullish, with Germany's Dax and France's Cac-40 up nearly 3%.
The pound was down against the euro at 1.26 as news of the bond-buying programme boosted the single currency. Sterling was higher against the US dollar at 1.59.
Miners and banks were among the biggest risers following the news. Vedanta Resources was ahead 6%, or 51p at 928p, and Lloyds was up 2.3p at 36.2p.
As expected, the Bank of England maintained its existing strategy by holding interest rates at 0.5% and leaving the target for its asset purchase programme at £375 billion.
While economic developments continued to drive sentiment in the wider market, there was also some focus on the corporate field after shares in Whitbread and Morrisons both rose by around 5% at one stage.
Whitbread, which owns Premier Inn and coffee chain Costa, continued to impress investors after it reported a 4.2% jump in like-for-like sales for the 11 weeks to August 16.
Panmure Gordon stockbrokers said the second quarter update was ahead of expectations, and shares were 111p higher at 2210p.
Supermarket group Morrisons has endured a tougher time of late, with pre-tax profits £9 million lower at £440 million for the six months to July 29. But with the results better than expected and plans being unveiled to reduce capital expenditure by £100 million over the next two years, shares lifted 12p higher at 292.7p. There was also some relief over the half-year dividend payment, which was 10% higher at 3.49p a share.
Outside the top flight, Dixons Retail Group enjoyed another decent session as the Currys and PC World owner took another step on the recovery trail with a 7% rise in UK like-for-like sales for the 12 weeks to July 21.
The stock has risen by two-thirds so far this year and was up by another 0.7p at 19.8p.
Mining company Lonmin was near the top of the FTSE 250 Index after a deal with unions to end a labour dispute in South Africa. Shares were 36.5p higher at 566p, a rise of 7%.
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