The FTSE was up one per cent despite uncertainty over the political leadership of Britain after last week's election ended with a hung parliament.
But the record European deal overshadowed UK politics in the markets.
EU finance ministers have sealed a deal to guarantee emergency loans worth €750bn to stop the Greek debt crisis from hitting other economies.
They approved a €60bn (£52bn) top up to an EU budget fund for helping struggling economies.
The remaining €440bn (£384bn) will be provided via a new European Stabilisation Fund which would prop up flagging economies such as Spain and Portugal if required.
The IMF will contribute an additional sum of at least half of the EU's total contribution, or €250bn (£218 bn).
The 16 members of the single currency bloc will have access to loans, under the agreement.
Economic Affairs Commissioner Olli Rehn said the agreement proved "we shall defend the euro whatever it takes".
Meanwhile the International Monetary Fund (IMF) has made a record €110bn (£94.75bn) emergency loan to help rescue the stricken Greek economy.
The record deal makes €5.5bn immediately available to the crisis-hit country, with €10bn being released by the end of the the year.
IMF Managing Director Dominique Strauss-Kahn said: “This strong action by the IMF to support Greece will contribute to the broad international effort underway to help bring stability to the euro area and secure recovery in the global economy.”
However, UK chancellor Alistair Darling vowed the UK will not to prop up the ailing euro.
He said: “We need to show again today that by acting together we can stabilise the situation, we do not want to jeopardise the recovery that is slowly taking place. And we will play our part in that.
“But when it comes to supporting the euro, obviously that is for the eurozone countries.”