European stock markets rallied on Monday on signs of a strengthening recovery in the Japanese and US economies as well as a boost for the mining sector from higher metals prices and a weak dollar.

Japan's economy grew at its strongest pace in more than two years in the third quarter at a rate of 1.2 percent, smashing market forecasts.

In the United States, spending rose by 1.4 percent in October in the retail sector — a crucial component of the US economy, the world's largest.

Nigel Gault, chief US economist of IHS Global Insight, said the US figures showed that "despite the consumer's gloomy mood, spending is improving."

Gold meanwhile surged to a new record high of $1136.72 per ounce and other metals gained too — giving a boost to shares in big mining companies.

"It is the mining sector lifting the market... as stronger commodity prices and a move by gold out to fresh all-time highs have given the index a fresh surge of momentum," said analyst David Jones at spread-betting firm IG Index.

London's benchmark FTSE 100 index rose 1.63 percent to 5382.67 points — its highest level in 14 months — the Paris Cac 40 gained 1.50 percent to close at 3863.16 and the Frankfurt Dax shot up 2.07 percent to 5804.82.

Elsewhere in Europe, Amsterdam gained 1.51 percent, Milan rose 1.44 percent, Brussels went up 1.15 percent and Madrid ended 1.01 percent up.

The DJ Euro Stoxx 50 index of top eurozone shares increased 1.50 percent.

"The real story today is the weaker dollar which is driving up equities and other risk assets," said analyst David Morrison at spread-betting firm GFT.

The euro rose against the US currency to 1.4975 dollars late on Monday in London, compared to 1.4911 dollars late on Friday in New York.

The big stock winners in London were mining companies, with shares in Lonmin up 9.30 percent at 1740 pence, Xstrata up 7.79 percent at 1093 pence and Rio Tinto up 5.49 percent at 3,305 pence.

In Paris, metals giant ArcelorMittal, the world's biggest steel maker, went up 4.27 percent to 26.01 euros, tyre manufacturer Michelin rose 3.56 percent to 55.82 euros and auto maker Renault gained 3.16 percent to 33.64 euros.

Car companies were big gainers in Frankfurt too, with Daimler up 4.40 percent at 35.81 euros and Volkswagen up 1.14 percent at 97.50 euros.

Investors were also tracking US President Barack Obama's visit to China after Beijing on Monday accused the United States of increasing protectionism and said American calls to let the yuan rise were "unfair."

Across Asia on Monday, Tokyo shares gained just 0.21 percent as investors stayed cautious despite news of faster-than-expected Japanese economic growth.

Sentiment was hit by fears of a wave of new share issues, with Hitachi announcing plans to raise 4.6 billion dollars to shore up its shaky finances.

Sydney meanwhile gained 1.04 percent and Hong Kong rose 1.73 percent.