UK shares and the pound have continued to regain some of the ground lost in the wake of the Brexit vote.
After rising 2.6% on Tuesday, the FTSE 100 share index was up 2.2% at 6,277.41 by midday.
The pound rose 0.75% against the dollar to $1.3443, although sterling still remains well below levels reached before the referendum.
Analysts also warned that the rally of the past couple of days might be short-lived.
"Stocks and the pound are continuing to firm but the post-Brexit reality will bite sooner or later," said Joe Rundle, head of trading at ETX Capital.
"What we`re seeing in the FTSE is hope in Britain being able to ride it out by remaining part of the single market. This looks like wishful thinking."
The market moves come as European Union leaders are meeting for a second day at a summit in Brussels.
The leaders are gathering without the UK after its vote to leave the bloc. On Tuesday, David Cameron said continued trade and security co-operation with the EU would be vital.
Over the worst?
The pound had risen as high as $1.50 on Thursday as traders anticipated a `Remain` vote, but by Monday it had plunged to a 31-year low against the dollar.
Sterling rose 0.4% against the euro on Wednesday to about €1.21. Before last week`s referendum it had been trading around €1.30.
At the close of trade on Thursday last week, the FTSE 100 stood at 6,338.10. However, in the volatile trade following the referendum result the index had dropped 5.6% by the end of Monday.
The FTSE 250 - which contains more UK-focused companies - slumped 13.7% in the two trading sessions following the referendum result. On Tuesday, it rose 3.6% and the index was 1.9% higher on Wednesday.
Shares in Asia continued to rise on Wednesday, and stock markets across Europe were also higher. Germany`s Dax index rose 1.8% while France`s Cac 40 was 2.5% higher.
Joshua Mahony, market analyst at IG, said: "There is a confidence within the City that perhaps the implications to this vote may not be as immediate nor far reaching as many initially thought, providing opportunities for bargain hunters to grab shares at a discount.
However, he added: "The big question is whether the worst is over, and the answer is unlikely to be yes.
"Sentiment is almost entirely dictated by unknown quantities for the coming months and even years, where the next major event coming when or if article 50 is enacted.
The price of gold hit a two-year high on Friday
"As such, having such a long period with this colossal cloud hanging over financial markets will be unlikely to help confidence and risk appetite."
Shares in the financial sector - which had been particularly hard-hit in the wake of the referendum - continued to recover, with Prudential up 6% and Barclays 3.2% higher.
The increases came despite credit rating agency Moody`s cutting its outlook on the UK banking sector to "negative" from "stable" late on Tuesday.
Moody`s also downgraded its outlook on the ratings of a number of UK banks and insurers.
After losing some ground on Tuesday, the price of gold edged up 0.4% to $1,317.50 an ounce.
Gold is viewed as a safe asset in times of uncertainty and the price of the precious metal hit a two-year high on Friday in the wake of the referendum result.
Government bonds are also considered safer investments. The return on UK government bonds on Wednesday remained close to the record low reached on Monday, when the yield from a 10-year gilt dropped below 1% for the first time.
Demand for government bonds rose after the referendum. This pushed up bond prices, and when the price of bonds rises their yield falls.
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