Investors recovered their risk appetite, pushing euro zone stocks up 0.2 percent, with financials the strongest sector, helping the bank-heavy Italian and Spanish markets outperform strongly with gains of 0.6 to 0.7 percent.
Euro zone stocks once again performed better than the broader pan-European STOXX 600 index as UK stocks slipped.
Euro zone banks jumped 1.1 percent, recovering after a risk-off mood dented financials in the previous session.
Banks ING, Santander, Unicredit and Intesa Sanpaolo drove gains, up 0.7 to 1.4 percent as confidence in the sector, and particularly peripheral European lenders, returned.
"In the world, the sector with the biggest potential to grow from here in earnings is probably continental European banks," said Kevin Gardiner, global investment strategist at Rothschild Wealth.
The tech sector edged up 0.2 percent, recovering slightly from several sessions of losses as investors grew more wary of highly valued parts of the market.
Sylvain Goyon, an equity strategist at France's Natixis, said the recent sell-off in technology shares was not driven by a change in the fundamentals of the sector and was not likely to last long.
"The key drivers of the industry are still there", he said.
He said a number of investors had just decided, as the end of the year neared, to cash in some profits from tech stocks which have outperformed the market. They have reinvested in cheaper financial shares, which are set to benefit from the U.S. tax cuts plan.
Some violent corporate stock swings stole the spotlight once again. Shares in Steinhoff plunged 45 percent, extending the previous session's dramatic fall after the South African retailer revealed accounting irregularities and its chief executive quit.
The stock was down 80 percent over the two sessions, knocking $12 billion off its market value.
At the other extreme, shares in Ladbrokes Coral climbed 3 percent after bookmaker GVC offered up to 3.9 billion pounds ($5.2 billion) to create a betting giant.
Also with the wind in their sails were wind turbine makers Siemens Gamesa and Vestas Wind, boosted by a note from Citi arguing renewables would account for half of global power generation capacity additions through 2030. The broker gave both stocks a "buy" rating.
Another standout performer was Europe's biggest debt collector, Intrum Justitia, up 11.4 percent after confirming an upbeat profit target.
The telecoms sector also enjoyed strong gains thanks to French operator Orange rising 2.1 percent after it set out plans to add customers and boost profit margins by investing in its networks rather than buying foreign rivals.
Deutsche Telekom, Vodafone and BT also rose 1.6 to 2.5 percent.
Carrefour meanwhile lost 2.9 percent, bottom of Paris' CAC 40 after a downgrade by Bernstein analysts who argued that recent share price gains were based on "wishful thinking" that a potential deal with Amazon was made more likely by the recent Casino-Ocado tie-up.
(Reporting by Julien Ponthus; Editing by Georgina Prodhan)
By Julien Ponthus and Helen Reid
Stocks treated in this article : Carrefour
, Intesa Sanpaolo
, Banco Santander
, Siemens Gamesa Renewable Energy
, Deutsche Telekom
, BT Group
, GVC Holdings
, Roche Holding Ltd.
, Ladbrokes Coral Group
, Vodafone Group
, Steinhoff International Holdings
, UniCredit SpA
, Intrum Justitia AB