The pan-European STOXX 600 index gained 0.8%, extending gains from last week. Sectors considered more economically sensitive such as oil and gas, travel and leisure, and automakers boosted the main markets.
That was despite a 36.2% plunge in Cineworld after the world's second-biggest cinema chain said it would close all of its UK and U.S. movie theatres later this week, leaving as many as 45,000 workers unemployed.
Oil majors Royal Dutch Shell, BP and Total surged, with crude prices jumping more than 6%. [O/R]
Investors took heart from signs that Trump's health is improving after he tested positive for COVID-19 on Friday, news that sent financial markets into a tailspin.
Doctors treating Trump said he could be sent back to the White House as soon as Monday, although outside experts warn that his case may be severe, raising uncertainty about the outcome of the Nov. 3 presidential election and a new U.S. fiscal stimulus being debated by lawmakers in Washington.
"Markets may remain choppy over the coming weeks," said Graham Secker, chief European equity strategist at Morgan Stanley.
"Once we get some clarity on the U.S. election, Brexit and vaccine front, I think that's going to be a positive catalyst for market.
"In the next 3-6 months view, this is a market where you'd want to buy into the weakness because we do expect 2021 to be quite a lot better than what we have been seeing this year."
Telecom stocks rose the most among sectors, with Vodafone up 4.7% after its lenders approved the merger of India's Bharti Infratel and Indus Towers, in which Vodafone has a stake.
Madrid-listed stocks outperformed with 1.2% on reports of consolidation in the banking sector.
Unicaja jumped 15.1% after it confirmed reports that it was in preliminary talks for a potential merger with its peer Liberbank, which surged 13.6%.
Italy's Nexi rose 3.1% after SIA and it agreed a long-awaited merger to create a dominant domestic payments group with 1.8 billion euros ($2 billion) in revenue.
French waste and water utility Suez fell 4.2% after investment fund Ardian decided not to make a bid in competition with bigger rival Veolia.
(Reporting by Sruthi Shankar; editing by Uttaresh.V and Ed Osmond)
By Sruthi Shankar