The FTSE 100 soared to its highest closing price in almost 11 months on the back of rallying oil prices and initial results in the US indicating that the Democrats might take control of the country's Senate.
Banking firms saw shares surge after reports that the Democrats are heading for victory in Georgia, sparking optimism around the ability to push through financial stimulus.
London's top flight finished 229.61 points, or 3.47%, higher at 6,841.86 at the close of play on Wednesday.
Connor Campbell, financial analyst at Spreadex, said: "The FTSE's insistent start to the New Year not only continued, but accelerated, on Wednesday afternoon, the index desperate to play catch-up with its European and US peers. Less than 48 hours on from Boris Johnson's lockdown announcement and the FTSE already seems to have forgotten all about it, in favour of vaccine optimism, gushing oil gains, and glee at the prospect of a Democrat-controlled Senate."
Standard Chartered, HSBC, Natwest and Barclays all made strong gains during the session as UK traders were bullish about progress under Joe Biden.
On Wednesday, the Bank of England's Sam Woods said: "If you look at the big movement in bank stocks today, the only plausible explanation is changing interest rate assumptions due to what's happening in the US."
The price of oil was similarly buoyant as a result of US election reports and positivity surrounding the rollout of the AstraZeneca and Moderna vaccines.
The price of Brent crude oil increased by 3.22% to $54.67 per barrel.
Elsewhere, the other major European indices all closed higher, albeit with more muted growth than in the UK.
The German Dax was 1.76% higher and the French Cac moved 1.19% higher.
In the US, the Dow Jones was comparatively tepid when stacked up against its European peers, but still opened higher as it edged towards a fresh peak.
Meanwhile, sterling dipped after a rebound in the value of the dollar.
The pound decreased by 0.24% versus the US dollar to 1.359 and was up 0.18% against the euro at 1.106.
In company news, high street bakery chain Greggs jumped in value despite saying it will post the first annual loss in its 82-year history. Greggs said it is braced for annual pre-tax losses of up to £15 million, significantly better than the £63m loss predicted by analysts. Shares closed 140p higher at 1,920p.
Events firm Informa saw shares lift after it said it has continued confidence that physical events will return through 2021 in North America and Europe. Shares rose 34.6p to 571.6p.
In the AIM stock exchange, mobile game company Gaming Realms saw shares surge after it secured a provision iGaming licence in Michigan as it seeks strong growth in the US. Shares rose by 5.6p to 27.8p at the close of play.
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