In morning London trade, the euro rose to $1.4128 from $1.4083 late in New York on Wednesday, a day after Portugal's parliament rejected a new austerity plan in a vote that prompted the resignation of Prime Minister Jose Socrates.

"The markets anticipated the Portuguese parliament's decision to reject the austerity plans and priced it in accordingly," said ETX Capital trader Anita Paluch.

"The bad news that caused strong reactions in the markets recently seem to have eased, less uncertainty for the future is pushing the market higher."

In stock market trade, the British capital's benchmark FTSE 100 index rose 0.85 percent to 5,844.84 points, Frankfurt's DAX 30 climbed 0.73 percent to 6,854.39 points and in Paris the CAC 40 grew 0.31 percent to 3,925.98.

The Lisbon market jumped 0.97 percent to 7,856.54 points in midday deals.

In Portugal on Wednesday, all five opposition parties voted against the Socialist government's fourth cost-cutting plan aimed at avoiding a multi-billion euro financial bailout like those given to Greece and Ireland.

The political drama threatened to derail the two-day EU summit, which was to open in Brussels later Thursday and is expected to finalise the bloc's response to a year-long eurozone debt crisis.

"The main factor affecting trading seems likely to be the never-ending story of European sovereign debt, after Portugal's prime minister resigned yesterday over parliament's rejection of the latest bailout-dodging austerity measures," said IG Index trader Will Hedden.

"The resulting political uncertainty only compounds the country's debt problems, and investors seem unwilling to make any big leaps of faith as the probability increases that Portugal will be joining Ireland and Greece in the EU handout queue."

Asian shares meanwhile mostly gained Thursday on bargain hunting but Tokyo slipped amid uncertainty over contaminated food and water and the ongoing struggle to avoid a meltdown at a stricken nuclear plant.

Japan's Nikkei began the day on a high as traders picked up cheap stocks following Wednesday's late fall caused by news that authorities in the capital had found dangerously high levels of radioactive iodine in tap water.

However, the index fell back to end the day 0.15 percent lower at 9,435 points on reports of more smoke rising from the Fukushima No.1 plant, which was hammered by the deadly March 11 quake and tsunami.

In London's foreign exchange trade, the dollar rose to 81.01 yen from 80.94 yen in New York on Wednesday. Gold meanwhile rose to $1,440.07 an ounce from $1,439.50 Wednesday.