Shares in Frankfurt set a brisk pace for the European bourses as bargain hunters went on a buying spree after last week's losses.
A technical rally driven by factors such as Friday's expiries of futures and options also provided support.
The Xetra DAX index put on 117.04 or 2.6 per cent to 4,686.74, undeterred by the choppy start on Wall Street. Traders said the IFO report on Germany's business climate out yesterday was very slightly below expectations, but not enough to have any bearing on the market.
Banks were at the centre of attention. Speculation by traders that Deutsche Bank plans to spin off its vast industrial assets worth 40 billion deutschmarks were the prelude to the sale of some of the assets, although the bank denied this.
Deutsche Bank gave up DM3.25 to DM95.75 on profit-taking after Tuesday's 7 per cent surge but the other banks shot ahead.
Commerzbank rose DM1.95 to DM48 and Dresdner Bank put on DM1.69 to DM70.49. HypoVereinsbank added DM5.05 to DM135.05, making up for some of its recent losses .
Paris ended 33.71 higher at 3,707.47 on the CAC 40 index, mostly pushed ahead by some steady buying among selected market heavyweights.
Oils rallied following a better day for international oil prices. Total gained 11 French francs to Ffr588 and Elf Aquitaine rose Ffr21 to Ffr642.
Amsterdam continued to push smartly higher ahead of today's options expiry, adding 13.23 at 1,097.12 on the AEX index. Financials had another strong day and a merger buzz got firmly behind media group Elsevier.
Milan fell from early highs after Wall Street opened weakly. The Mibtel index, up 1.9 per cent at one stage, finished 112 or 0.5 per cent higher at 21,810.
