The FTSE 100 jumped 6.17 per cent as confidence returned after the government announced a £37 billion investment in Lloyds TSB, HBOS and RBS.
At 9:40 BST the index was up 242.39 points to 4,174.45.
The morning rise follows a 21 per cent slump over last week.
Much of the attention in early trading was on the banks
HBOS dropped 15.38 per cent to 104.90p and RBS fell 5.72 per cent to 67.50p - compared to 562p a year ago.
Lloyds TSB was up 8.50 per cent to 205.50p, Barclays rose 12.53 per cent, HSBC rose 7.47 per cent to 849p.
The biggest gain was seen for TUI Travel - up 20.18 per cent - while rival Thomas Cook gained 6.84 per cent.
Cairn Energy rose 13.49 per cent, Man Group gained 12.71 per cent and miner Kazakhmys was up 12.33 per cent.
In Europe, the Dax was up 6.51 per cent and the Cac 40 gained 7.15 per cent - as European leaders agreed to guarantee inter-bank lending at the weekend.
In New York, the Dow is also expected to open up, when the bell chimes this afternoon.