The blue chip index closed at 5,257.85 – a rise of 14.45 points.
Markets moved out of morning falls as Morgan Stanley announced profits that beating market expectations.
The US investment bank posted quarterly profits of $757 million (£455 million), after a loss of $159 million in the second quarter.
The results boosted indices in the US, with the Dow up 0.45 per cent at 11:35 EDT (16:35 BST).
In Europe the Dax was up 0.37 per cent and the Cac 40 rose 0.05 per cent.
Joshua Raymond, market strategist at City Index, said: 'European indices quickly reversed earlier losses to close higher on Wednesday after investors were buoyed into buying equities after Morgan Stanley announced profits that outperformed market expectations.
'The morning session in Europe had largely been about profit taking and anticipation of Morgan Stanley's results. As soon as the results were announced, we saw investors pour back into the market looking to buy equities that had sold off over the previous 24 hours.'
He added in London brokers noted increased demand for stocks today – particularly for Wolseley and Tesco.
Leading the gains was Admiral Group – rising 3.40 per cent.
Wolseley rose 2.90 per cent, ICAP climbed 2.80 per cent, Cable & Wireless gained 2.72 per cent and Inmarsat climbed 2.38 per cent.
Smiths Group lost 3.82 per cent, BAE Systems slipped 3.30 per cent and Pearson dropped 2.74 per cent.
On the currency markets, sterling benefited from the release of the minutes form the last meeting of the monetary policy committee (MPC).
The pound was up 1.45 per cent against the dollar to $1.6619 and up 1.06 per cent against the euro to €1.1080.
This puts the euro at a one-month low against sterling.
Duncan Higgins, senior analyst at Caxton FX, said: 'Although all nine members voted unanimously to maintain asset purchases at their current level, there were comments that suggest the book has not yet been closed on a possible extension.
'There were hints that there are mixed views within the committee about the risks of inflation, implying that certain members may still be willing to pump more money into the economy.'
He added all attention is now on GDP figures on Friday.
'Should the data disappoint market expectations and reveal that the UK economy is still enduring the worst recession since the war, the pound could easily find itself in a deep slump well into 2010,' Mr Higgins said.
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