The pan-European STOXX 600 <.STOXX> closed up 0.1 percent, with the banking sector leading gains after ECB chief Mario Draghi said there was no longer a sense of urgency about propping up the eurozone economy.
While the central bank said it would keep its stimulus in place until the end of the year, it removed from its statement a reference to using all available instruments to support growth and inflation - a move well-received by markets.
Bund yields hit a one-month high and the euro rose sharply during Draghi's press conference.
European banks <.SX7P> erased earlier losses to end up 1.1 percent, while the euro zone banks index <.SX7E> closed up 2.2 percent, on the higher bond yields and Draghi's optimism about the economy.
Akzo Nobel (>> Akzo Nobel) rose 13 percent to its highest level in nearly two years, leading gains on the pan-European index, after the paint maker rejected a 21 billion euro bid from US rival PPG (>> PPG Industries, Inc.).
The Dutch group said PPG's offer undervalued the company but added it would instead look at floating or selling its speciality chemicals business.
Jauke de Jong, analyst at AFS Group in Amsterdam, said a successful takeover by PPG was highly unlikely as he expected antitrust authorities to oppose a deal between the world's two largest paint and coating companies.
"It's unlikely that PPG will come back with an improved offer," he said. "The decision to sell its Specialty Chemicals business gives Akzo Nobel a lot of firepower to possibly be more aggressive in acquisitions itself in the currently consolidating industry."
News about the offer for Akzo added to a surge in European deal-making activity that has helped power the recent stock market rally along with strong economic data and a good earnings season.
French publisher Lagardere (>> Lagardère) was the second-best performer, up 10.3 percent, chalking up its best daily gains in more than eight years, after a top-ranked Barclays analyst raised his rating on the stock, citing cash flow achievement.
The heaviest STOXX faller was Domino's Pizza (>> Domino's Pizza Group PLC.), down 13.2 percent after disappointing results.
It was followed by Britain's fourth biggest supermarket Morrisons (>> WM Morrison Supermarkets PLC), which gave a cautious outlook, and French retailer Carrefour (>> Carrefour), which reported a lower than expected operating profit.
Basic resource and energy stocks were the biggest drag after crude oil prices plunged to below $50 a barrel, their lowest level this year, on record U.S. crude inventories.
Tullow Oil (>> Tullow Oil plc) was down 7.4 percent, one of the biggest drags on the European index. Britain's FTSE <.FTSE> had its sixth day of losses, weighed by commodity stocks.
A well-received update from Aviva (>> Aviva plc) lifted its stocks 6.5 percent to their highest level since April 2015.
The British insurer generated forecast-beating annual profit, boosted by growth in general insurance and asset management, and said more of its growing cash pile would be handed back to shareholders in 2017.
(Reporting by Danilo Masoni, Helen Reid; Editing by Toby Davis and Hugh Lawson)
By Danilo Masoni and Helen Reid