Shares in the world's second-biggest fashion retailer jumped 10.8%, recording their biggest daily rise in almost six months after the company beat quarterly profit forecasts as it recovered more quickly than expected from a coronavirus-induced slump.
The retail index rose 2.3%, leading sectoral gains in Europe.
Miners rose 1.7% after data showed industrial output in China, the world's top metal consumer, accelerated the most in eight months in August, while retail sales grew for the first time this year.
China-reliant luxury stocks like LVMH, Kering and Hermes also gained, boosting the STOXX 600.
The ZEW economic research institute said investor sentiment in Germany rose unexpectedly in September, signalling confidence in a recovery from the coronavirus crisis.
"The hard data - retail sales, industrial production, exports - suggest activity is largely rebounding as we expect, in a tick-shape manner," said Florian Hense, an economist at Berenberg.
"After initially rebounding strongly, the trajectory of the recovery has flattened, but continues firmly during Q3."
All eyes are on the conclusion of the U.S. Federal Reserve's monetary policy meeting on Wednesday, the first since Chairman Jerome Powell unveiled a shift toward greater tolerance of inflation, effectively pledging to keep interest rates low for longer.
The Bank of England is also set to meet on Thursday.
The UK's FTSE 100 jumped 1.3%, outperforming its European peers after a handful of positive corporate updates, better-than-expected jobs data and as Prime Minister Boris Johnson faced opposition within his party to proposed legislation that would breach the Brexit treaty.
Britain's Hiscox surged 17.0% to the top of STOXX 600 as London judges ruled that some insurers were wrong to reject claims from small firms battered by the COVID-19 pandemic, but the costs were less than expected, according to the company.
The broader pan-European STOXX 600 index rose 0.7% to close at its highest since Aug. 27, while euro zone stocks gained 0.4%.
The bloc's banks <.SX7E> slid 1.5% to become the worst-performing sector. ECB board member Fabio Panetta became the latest to highlight risks from a strong currency, saying the results of its stimulus measures are "not fully satisfactory yet".
Fiat Chrysler jumped 9.0% and Peugeot maker PSA rose 2.2% after the carmakers restructured the terms of their planned merger to conserve cash.
(Reporting by Sruthi Shankar in Bengaluru; Editing by Uttaresh.V and Jan Harvey)
By Sruthi Shankar