Leading European stock markets climbed while the euro edged lower against the dollar on Tuesday as traders followed a meeting of European finance ministers, welcomed German investor sentiment data and digested corporate results.
London's benchmark FTSE 100 index of leading shares closed with a gain of 0.82 percent at 6,686.06 points.
Frankfurt's DAX 30 added 0.72 percent to set another record high at 8,339.11 points amid news that investment sentiment in Germany stabilised in May following a sharp decline the previous month.
In Paris, the CAC 40 rose by 0.53 percent to 3,966.06, and Madrid added 0.20 percent to 8,474.6, with borrowing costs for Spain easing as the indebted eurozone nation raised more than 4.0 billion euros ($5.2 billion) in short-term debt.
Milan's FTSE Mib index was 0.84 percent higher at 17,315 points, but in Lisbon, the PSI-20 index plunged by 3.01 percent to 6,032.07, dragged down by corporate developments.
In foreign exchange trading, the European single currency edged down to $1.2958 from $1.2975 late on Monday in New York. The dollar rose to 102.32 yen from 101.82 yen Monday, reaching its highest level since October 2008.
On the London Bullion Market, gold increased to $1,433.75 an ounce from $1,430.75.
In New York, US stocks traded higher in midday exchanges following a solid improvement in small-business confidence.
The Dow Jones Industrial Average gained 0.56 percent to 15,175.46 points, the broad-based S&P 500 rose 0.84 percent to 1,647.47, while the tech-rich Nasdaq Composite Index increased 0.76 percent to 3,464.78.
"European markets recovered later (in the) afternoon as US stock indices advanced thanks to comments by high profile US fund manager David Tepper saying he is bullish on equities on CNBC TV," noted ETX Capital analyst Ishaq Siddiqi.
In Germany, Europe's biggest economy, the investor confidence index calculated by the ZEW economic institute rose fractionally by 0.1 point to 36.4 points in May after falling sharply last month.
"Despite mostly positive economic data for the German economy, the ZEW indicator remains at the level of the previous month. This may be due to the still poor economic situation in the eurozone, that is also reflected by the recent ECB interest rate cut," said ZEW president Clemens Fuest.
Separately, official data showed that industrial output in the 17-nation eurozone jumped by a surprisingly strong 1.0 percent in March compared with February, when it rose by 0.3 percent.
Attention was meanwhile firmly on Brussels.
"On a fairly light day for economic data, apart from the latest German ZEW survey and European industrial production numbers, we can once again amuse ourselves as European policymakers continue to bicker and squabble and tie themselves up in knots about the timing or otherwise of a banking union," said Michael Hewson, senior analyst at traders CMC Markets UK.
In company activity, shares in mining groups were among the biggest fallers amid strike action in South Africa and a day after India's Tata Steel announced a $1.6-billion asset writedown on slumping demand in its main European market.
In Paris, top global steelmaker ArcelorMittal slid 1.67 percent to 9.79 euros, while over in London, miner Anglo American lost 1.71 percent to 1,550 pence and Glencore Xstrata dropped 1.43 percent to 340.35 pence.
The London market remained buoyant however thanks to the water company Severn Trent, shares in which leapt by 13.81 percent to 2,077 pence owing to interest in the group by a consortium comprised of companies from Canada and Kuwait.
Shares in platinum miner Lonmin shares plunged 7.31 percent to 265.10 pence as thousands of workers downed tools at a mine in South Africa run by the London-listed group, after a union leader was shot dead at the weekend.
The FTSE 250 index on which Lonmin's shares are listed was 0.54 percent higher overall.
In Paris, EADS shares jumped 3.01 percent to 42.44 euros after the European aerospace giant reported a near doubling of first-quarter net profit, boosted by a strong performance by its main subsidiary Airbus which makes airliners.