The FTSEurofirst 300 closed up 13.82 points, or 1.2 percent, at 1,162.10.
A narrowing trade deficit in the U.S. and data overnight showing growing demand for Chinese exports nurtured hope that the global economy will strengthen.
Meanwhile, European Union leaders ended a bout of uncertainty by reaching an agreement on the bloc's long-term spending plans after more than 24 hours of negotiations.
"The key drivers for the macro recovery in January and the subsequent equity rally appear to be holding and as a result we have seen a lot of the week's pullback eradicated," Adam Seagrave, equity Trader at Saxo Bank, said.
The euro zone blue chip index rose 1.3 percent, finding support around its 200-week moving average (MA) at 2,616. The index has not closed below its 200-week MA since mid-December.
The brightening outlook for the global economy helped lift demand for miners, which rose 1 percent, but it was the banks, up 2.8 percent, which were the main drivers.
French bank Credit Agricole gained 6.9 percent after brokerage Exane upgrades it to "outperform," citing the significant discount it trades at relative to peers.
Norwegian bank DNB rose 4.6 percent, building on a 7 percent gain in the previous session after having delivered on its dividend promise, after UBS, Nomura and Credit Suisse produced upgrades on the stock.
The sector as a whole regained most of the losses of the last four days but found resistance around it 14-day moving average of 175.75.
While the broader FTSEurofirst 300 finished the session strongly, the index fell for the second week in succession, edging further away from 2-year highs which is proving a tough resistance level.
"On a personal level if you are the man on the street would you looking to be buying into this move It is a tough decision but if you believe in the macro data that we are seeing then things care coming together which will aid the recovery further," a London-based trader said.
Improving global data could help companies keep up with their recent reratings, which in terms of price-to-earnings ration (PE) of 12 times are now at post credit crises highs.
Heavyweight mobile telecoms firm Vodafone climbed 1.2 percent after BofA Merrill Lynch upgraded the company to "buy" from "neutral" noting consensus earnings downgrades are slowing and could potentially of a merger or takeover in the future.
With PEs at mutli-year highs companies are under pressure to meet expectations.
56 percent of companies in Europe have so far met or beaten earnings expectations in the fourth-quarter, although year-on-year fourth-quarter earnings have contracted 22.5 percent, according to Thomson Reuters (TRS) data.
Those corporate which disappoint at the earnings level continue to be punished by the market. Those that have missed earnings expectation have underperformed by an average of 2 percent, according to TRS data.
Swedish medical technology group Getinge shed 4.8 percent after it pushed back its profit margin target by one to two years.
Imperial Tobacco fell 2 percent after Investec cut its rating to "hold" from "buy" on worries profits could be squeezed as planned cost optimisation looks challenging when the company starts with some of the best margins in the industry.
"We don't think a take-out is imminent enough and while Imperial Tobacco looks 'cheap', it doesn't look that cheap in the current Darwinian climate," Investec said in a note.