Britain's benchmark index climbed 41.40 points, or 0.8 percent, to 5,206.80 by 1150 GMT, adding to a 1.9 percent rise on Tuesday which snapped a seven-session losing streak when the index lost more than 14 percent of its value.
The FTSE 100 is trading on a forward price earnings of 9.45 times, compared with a 10-year average of 14.1 percent, while offering a dividend yield of 3.7 percent against 2.6 percent on a 10-year government bond, Thomson Reuters Datastream showed.
Banks were among the top gainers, with Barclays up 3.8 percent as WestLB raised its recommendation to "buy" from "add", while Citigroup names the lender as a most preferred stock on valuation grounds.
Standard Life jumped 12.5 percent after the insurer reported forecast-beating first-half results, which prompted Panmure Gordon to upgrade its rating to "buy".
Man Group added 9.2 percent, boosted by recent director share-buying and after the hedge fund manager reported the net asset value at its flagship AHL fund rose 1.9 percent last week.
Elsewher, engineer Weir Group gained 6.3 percent, bouncing back after recent sharp falls after Goldman Sachs upgraded the engineer to its "Conviction Buy" list, saying the recent 23 percent fall offered a compelling entry point.
Analysts remained to be convinced that the uptick over the past two days was more than a short-term bounce.
"Trading remains highly volatile and the rallies we have seen have been choppy in nature too, emphasising that traders remain on edge," Joshua Raymond, chief market strategist, at City Index, said.
Evidence that investors remain nervous was seen with gold and the Swiss franc, traditional safe havens, remaining near recent highs.
"The FTSE 100 needs to break back above 5,400 if we are to be convinced that this relief rally has legs," Raymond said.
MACRO CLOUDS
Adding to uncertainty over the broader economic outlook, the Bank of England cut its growth forecasts and said inflation would fall rapidly in 2012.
That followed the US Federal Reserve's pledge overnight to keep interest rates in the world's biggest economy lower for longer as it tackles bulging debts and sluggish growth.
While low interest rates are good for equities, they leave bid question marks hanging over the outlook for growth in the developed world and its impact on corporate earnings.
"Loose monetary policy is all very well but as we have seen from the end of QE2 as soon as government withdraws that stimulus growth begins to flag," Jimmy Yates, head of equities at CMC Markets, said. "Investors need evidence that economies in the developed world can stand on their own two feet."
US stock index futures pointed to a lower open on Wall street, following the previous session's rally.
After Tuesday's news from the US FOMC, investors will look to the July US Federal Budget for further clues as to the state of the US public finances, although the release was not due until 1800 GMT, after London closes.
The main losers on the FTSE 100 index were stocks that had been fairly resilient during the recent sell-off.
Defensively perceived British American Tobacco, fell 0.4 percent and supermarket chain Tesco was off 0.4 percent.
The Office of Fair Trading announced it was fining certain processors an supermarkets, including Tesco and Sainsbury, almost 50 million pounds for anti-competitive behaviour.
Copyright Reuters, 2011