London stocks ended the session with a gain of 1.1% to 24,983.18 points and Paris closed 0.4% higher at 5,637.51, while Frankfurt was shut for a public holiday.
The Milan stock market however dropped 1.5% at 23,092.38, amid concerns that Italy is inching towards becoming the first EU founding member to have an eurosceptic government.
On the other side of the Atlantic, Wall Street was in positive territory, with the Dow Jones gaining more than 1%.
After high-level talks in Washington, economic superpowers China and the United States revealed a deal had been hammered out, ending months of tension that had sent financial markets into a spin.
Treasury Secretary Steven Mnuchin told Fox News on Sunday that “right now we have agreed to put the tariffs on hold” while Xinhua reported China’s Vice Premier Liu He as saying “the two sides reached a consensus, will not fight a trade war, and will stop increasing tariffs on each other”.
While short on detail, the announcements provided much relief to investors, who had been fearing the imposition of levies on billions of dollars of exports between the two sides.
“The FTSE is trading at fresh record highs into the new week,” said Accendo markets analyst Mike van Dulken.
“The latest leg comes courtesy of a calming in US-China trade war rhetoric, which merely adds to the general positive momentum of late.”
“Markets acted with relief that the US seems to be taking a more conciliatory approach to trade with China and sanctions on Iran,” said Jasper Lawler at London Capital Group.
“Investors jumped two feet back into equities and kept up a bullish dollar bet that has decimated the value of most other global currencies over the last month.”
The positive news lifted the greenback, which had faced some selling pressure after Donald Trump imposed tariffs on some steel and aluminium imports to the dismay of major US trade partners.
“After the US-China agreement on backing off from imposing trade tariffs on each other, one risk-off factor was removed, which pushed the dollar up against the yen,” Marito Ueda, senior dealer at FX Prime in Tokyo, told AFP.
Looking at sterling, Forex.com analyst Fawad Razaqzada said the pound had started the week lower, “suggesting market participants are not too optimistic about the prospects of a breakthrough in Brexit talks ahead of the next round of negotiations with Brussels today.”
Traders are also awaiting the release tomorrow of minutes from the US Federal Reserve’s last policy meeting, hoping for fresh clues about its plans for raising interest rates.
Continuing improvement in the US economy has fanned expectations the central bank will lift borrowing costs four times this year.
