SHARES posted a second day of triple-digit gains yesterday after the European Central Bank (ECB) stepped up efforts to contain the continent's government debt crisis and investors began to eye the 6,000-barrier again.
ECB president Jean-Claude Trichet failed to announce an increase in the pace at which the central bank buys government bonds.
But markets were lifted by news it would prolong measures to provide ready cash to banks and steady the financial system.
The FTSE 100 Index surged 2.2 per cent, closing 125.06 points higher at 5,767.56, after Trichet said the bank would delay the exit from its emergency liquidity measures and would continue to offer unlimited loans to banks through the first quarter of next year.
Traders were encouraged by reports that British banks were financially supported by the US Federal Reserve during the financial crisis, with Barclays being among the biggest beneficiaries. The revelation of the scale of borrowing reinforced the role of the Fed as a last resort lender in the banking world.
Michael Hewson, analyst at CMC Markets, said: "Equity markets picked up where they left off on Wednesday.
"Company announcements have mostly been well-received, which - along with the usual suspects of miners and banks - have pushed equities to one-week highs."
The pound fell against the euro to €1.17, as the single currency fought back from losses sparked by the ECB's silence over its bond-buying plans. Sterling was also down against the dollar, which had been lifted by strong retail and homes data.
Banking stocks led the advance, with part-nationalised banks Lloyds and Royal Bank of Scotland up 2.5p at 66.5p and 1.6p at 41.6p respectively.
In corporate news, Thomson Holidays-owner TUI Travel advanced more than 7 per cent after its full-year results revealed an 11 per cent increase in full-year operating profits.
The travel firm made an underlying operating profit of 447 million in the year to 30 September, up from 401m the previous year. Shares were up 15.6p at 230p.
B&Q owner Kingfisher was not far behind with shares lifting 17.1p to 254.9p after it said growth in international sales had offset a decline in the UK.
Rolls-Royce shrugged off earlier losses, after Australian airline Qantas said it had launched preliminary legal action against the company, following the recent failure of its Trent-900 engine, which was powering a Qantas A380 superjumbo. The incident resulted in a lengthy grounding of the airline's fleet of six A380s for a safety review.
The airline filed a statement of claim in a federal court that will allow it to launch legal action against Rolls-Royce if required.Shares were up 7.5p at 626p.
Outside the top flight, JJB Sports closed 1p lower at 4.7p, but did plunge 30 per cent at one stage, after it revealed it expected to breach certain financial covenants on a 25m Bank of Scotland loan after a deterioration in trading.
The sportswear retailer said sales continued to be below expectations and warned heavy snowfall and freezing temperatures sweeping the country could further hurt performance.