The pan-European STOXX 600 index closed 0.8% higher after making hesitant gains in morning trading.
The German DAX jumped 0.9%, also hitting its highest since mid-September, while France's CAC 40 rose 0.6% and London's FTSE 100 gained 0.5%.
Helping Europe rally into the close, Wall Street indexes jumped as U.S. President Donald Trump signalled progress in negotiations around new fiscal stimulus days after calling off talks on a more comprehensive deal.
However, U.S. House Speaker Nancy Pelosi said there would be no additional federal aid for U.S. airlines without a bigger relief package.
"It's a sentiment driver for the market at the moment," said Roger Jones, head of equities at London and Capital. "The market has become very fiscally orientated, yet the numbers provided can only provide a short-term boost."
Beaten-down sectors such as banks <.SX7P>, oil & gas <.SX8P> and travel & leisure were among the top gainers. But tech <.SX8P> and pharma also offered support.
UK oil majors Royal Dutch Shell and BP gained over 2% with crude prices climbing above $43 a barrel on signs of supply shortages.
Airline stocks also jumped, with British Airways owner IAG and Lufthansa up 10.3% and 6.1% respectively.
The gains came even as COVID-19 cases surged across Europe, with more than 17,540 new daily cases recorded in the United Kingdom, while hospitals in the Paris region moved into emergency mode.
An upgrade by Goldman Sachs to "buy" helped German television network ProSieben jump 3.7%, while French ad firm Publicis rose 2.0% after analysts said they expect it to outperform global peers in the third quarter.3.9
Spain's Telefonica gained nearly 3% after Reuters reported that it was in the final stages of negotiating a roughly 5 billion euros (4.55 billion pounds) deal to build a fibre-optic network in Germany.
(Reporting by Sruthi Shankar in Bengaluru; Editing by Arun Koyyur)
By Sruthi Shankar