LONDON: European stocks rallied on Thursday, mirroring gains elsewhere, on optimism over talks aimed at avoiding a so-called fiscal cliff in the United States, and after upbeat unemployment data in Germany.
In late morning deals, London's benchmark FTSE 100 index won 0.92 percent to 5,855.57 points, Frankfurt's DAX 30 added 0.71 percent to 7,395.68 points and the Paris CAC 40 climbed 1.05 percent to 3,552.09.
Madrid's IBEX 35 index soared by 1.30 percent to 7,938.70 points, rebounding from losses the previous day following heavy job cuts at Spanish nationalised lender Bankia.
The European single currency advanced to $1.2986 from $1.2939 late in New York on Wednesday. On the London Bullion Market, gold prices rose to $1,724.07 an ounce from $1,708 Wednesday.
The V2X indicator which measures volatility on the Eurostoxx 50 index of the 50 biggest quoted companies in the eurozone fell to the lowest level since 2007, before the collapse of Lehman Brothers marked the beginning of the financial crisis.
Asian markets mostly tracked Wall Street higher on Thursday after House of Representatives speaker John Boehner said Wednesday he was optimistic of a fiscal deal between his Republicans and their bitter Democratic rivals.
President Barack Obama also said he expected a solution would be found before Christmas to avert the "fiscal cliff" of automatic taxation hikes and spending cuts that will be activated on January 1 if they fail to reach agreement.
"The mood changed dramatically yesterday after John Boehner and President Obama expressed optimism that a deal could be reached," said analyst Fawad Razaqzada at trading firm GFT Markets.
European sentiment was also boosted on Thursday by official data showing that Germany's jobless total rose 5,000 in November from October. That beat forecasts of a 15,000 gain, according to Dow Jones Newswires.
"The number... is definitely good news, especially if we bear in mind the estimate was much higher," said trader Anita Paluch at Gekko Global Markets.
London's indices gained support also after British engineering firm Invensys agreed to sell its rail signalling division to German industrial giant Siemens for £1.742 billion ($2.79 billion, 2.15 billion euros), sparking speculation over a potential takeover.
Invensys added in London late on Wednesday that it would return £625 million to shareholders, or about 76 pence per share.
The firm will also place £250 million in reserve, while the remainder will address a group pension deficit.
In reaction on Thursday, Invensys shares rocketed by 9.61 percent to 306.90 pence on London's second-tier FTSE 250 index, which was 0.87 percent higher at 11,994.50 points.
"We suspect it may be only be a matter of time before Invensys is acquired once the sale to Siemens is completed -- likely around May 2013," noted RBC Capital Markets analyst Andrew Carter.
"The disposal of rail leaves Invensys more focused on automation and eliminates the UK defined benefit pension net deficit, thereby removing two major obstacles for potential acquirers."
Siemens stock added 0.76 percent to 79.54 euros in Frankfurt deals.
Kingfisher shares slid 1.48 percent to 276.45 pence after Europe's biggest home-improvements retailer posted weak third-quarter profits and sales, hit by adverse foreign exchange moves and a poor performance in France.
In Paris, shares in construction engineering group Eiffage rose by 7.40 percent to 29.61 euros, to show a rise of nearly 60 percent this year, mainly for technical reasons because the price had breached a key level and because of year-end book dressing by investors.
Traders were later Thursday to digest the latest estimate of US economic growth for the third quarter of the year.
New York stocks had churned higher on Wednesday, spurred by encouraging remarks by politicians over the fiscal talks.