The FTSE 100 closed up 2.3 per cent at 6,569.96.
Tesco was the best-performing stock on the FTSE 100, closing up 15 per cent at 209.25p.
The retailer’s new chief executive, “Drastic” Dave Lewis, announced a raft of new measures – including store closure and reform of its generous pension scheme – that he hoped would put the struggling chain back on track.
The grocery sector was lifted as a whole, with Sainsbury, up 9.9 per cent to 252.40p, and Morrison gaining 7.8 per cent to 184.70p.
However, Marks and Spencer was down 3.5 per cent at 446.90p after it reported yet another quarter of falling general merchandise sales over the key Christmas quarter.
Bikes and car parts retailer Halfords fell 8.5 per cent to 423.30p, after Tesco poached its CEO Matt Davies for the same post at its UK and Ireland business.