The top flight, which lost ground in the first three sessions of the week, closed 53 points higher at 5829.8 as it emerged that applications for unemployment benefits fell last week to 339,000, the lowest in more than four years.
The pound was up against the US dollar at 1.60 as the greenback gave up some of its recent gains, triggered by global uncertainty. Sterling was down against the euro at 1.23.
Luxury goods retailer Burberry topped the risers board with a 13% surge, up 133p to 1136p, as an update on recent trading offered comfort following last month's profits warning.
The group said retail revenues were up 10% to £577 million in the first half of its financial year, offsetting fears over slowing demand in China.
Elsewhere in the retail sector, WH Smith disappointed investors by announcing that highly regarded chief executive Kate Swann will step down in June.
She has overseen a recovery in the company's performance during nine years at the helm, culminating in today's 10% hike in annual profits to £102 million. Shares in the FTSE 250 Index retailer were 3% or 21.5p lower at 630.5p.
Bakery chain Greggs was also under pressure in the second tier after it said like-for-like sales were recovering from this summer's difficult trading conditions at a slower than expected pace. The stock fell 20.5p to 496p.
Meanwhile, conditional trading in Churchill and Privilege insurer Direct Line Group got off to a strong start.
With shares initially priced at 175p, the stock rose soon after trading began and closed ahead at 188p, valuing the Royal Bank of Scotland business at just over £2.8 billion.
Retail investor demand was strong in the group's IPO, with private investors snapping up 15% of shares offered, taking a 4.5% stake in the firm.
State-backed parent RBS rose 11.1p to 273.8p as the float raised an initial £787 million for the bank, rising to £905 million with an over-allotment option.
Fellow blue-chip banks also continued to make gains after yesterday's boost from news that the Financial Services Authority has relaxed capital and liquidity rules in another attempt to kickstart lending to support recovery.
Barclays rose 5% or 10.7p to 232.7p, part-nationalised Lloyds Banking Group added 0.8p to 39.3p and HSBC lifted 7.6p to 597.2p.
Supermarket Morrisons was suffering after a broker downgrade, which left shares 4.5p lower at 269.5p.
Credit Suisse said Morrisons is still struggling to get back on track after losing market share to its three main rivals in recent months.
The biggest Footsie risers were Burberry up 133p at 1136p, Barclays ahead 10.7p at 232.7p, Croda International up 101p at 2322p and Royal Bank of Scotland ahead 11.1p at 273.8p.
The biggest Footsie fallers were Morrisons down 4.5p at 269.5p, GlaxoSmithKline off 8.5p at 1427.5p, Smith & Nephew down 3.5p at 651.5p and Next off 17p at 3576p.