The pan-European STOXX 600 index gained 0.89pc to 415.68 points, surpassing the previous life-high made in April 2015.
Trade-sensitive miners were the top gainers after U.S. Trade Representative Robert Lighthizer said over the weekend that a "phase one" U.S.-China trade deal will nearly double U.S. exports to China over the next two years and is "totally done".
Germany's DAX lagged its European peers, however, as Markit's Purchasing Managers' Index showed private sector activity shrank for the fourth month running in December as a downturn in manufacturing offset services sector growth.
French business activity grew at a steady pace in December despite a nationwide strike against pension reform, but the activity in the manufacturing sector came unexpectedly close to stagnating.
London's FTSE 100 jumped 1.2pc, with banks extending gains as British Prime Minister Boris Johnson eyed a vote in parliament soon to deliver his Brexit deal.