European stocks rallied on Thursday, mirroring gains elsewhere, on optimism over talks aimed at avoiding a so-called fiscal cliff in the United States, and after upbeat unemployment data in Germany.
Madrid's IBEX 35 index soared by 1.74 percent to 7,973.70 points, rebounding from losses the previous day following heavy job cuts at Spanish nationalised lender Bankia.
The European single currency advanced to $1.2956 from $1.2939 late in New York on Wednesday. On the London Bullion Market, gold prices rose to $1,725 an ounce from $1,708 Wednesday.
"Europe's markets have continued where US markets left off last night, pushing higher on a combination of optimism about a deal that will nip the problem of the impending US fiscal cliff in the bud," said Michael Hewson, Senior Market Analyst at CMC Markets UK.
A bid by German giant Siemens bid to buy the rail and signalling division of UK systems and solutions provider Invensys for £1.742 billion ($2.79 billion, 2.15 billion euros) also boosted investor confidence, he added.
US stocks pushed higher in early trade, chasing solid gains in markets in Asia and Europe, helped by a strong upward revision in the US economic growth estimate for the third quarter.
But by midday the Dow Jones Industrial Average had pulled back to show a loss of 0.07 percent to 12,976.24 points after the latest comments from US House of Representatives speaker John Boehner on scant progress of talks to avoid the fiscal cliff.
The S&P 500 gained 0.07 percent to 1,410.93 points, while the Nasdaq Composite added 0.26 percent to 2,999.68 points.
The US economy grew at a 2.7 percent pace in the third quarter, faster than the 2.0 percent previously estimated, the Commerce Department said.
US jobless claims fell back to 393,000 in the most recent week, the Labor Department said Thursday, still showing the impact of superstorm Sandy which blasted the Northeast in late October.
The V2X indicator which measures volatility on the Eurostoxx 50 index of the 50 biggest quoted companies in the eurozone fell to the lowest level since 2007, before the collapse of Lehman Brothers marked the beginning of the financial crisis.
Asian markets mostly rose with Tokyo adding 0.99 percent, Sydney up 0.68 percent, Seoul climbing 1.15 percent, and Hong Kong rising 0.99 percent, but Shanghai fell 0.51 percent to a near four-year low.
President Barack Obama said Wednesday he expected a solution would be found before Christmas to avert the "fiscal cliff" of automatic taxation hikes and spending cuts that will be activated on January 1 if they fail to reach agreement.
European sentiment was also boosted on Thursday by official data showing that Germany's jobless total rose 5,000 in November from October. That beat forecasts of a 15,000 gain, according to Dow Jones Newswires.
"The number... is definitely good news, especially if we bear in mind the estimate was much higher," said trader Anita Paluch at Gekko Global Markets.
Invensys also added in London late on Wednesday that it would return £625 million to shareholders, or about 76 pence per share. The firm will also place £250 million in reserve, while the remainder will address a group pension deficit.
In reaction on Thursday, Invensys shares rocketed by 8.93 percent to 305 pence on London's second-tier FTSE 250 index, which rose 1.14 percent to close at 12,026 points.
"We suspect it may be only be a matter of time before Invensys is acquired once the sale to Siemens is completed -- likely around May 2013," noted RBC Capital Markets analyst Andrew Carter.
Siemens stock added 0.27 percent to 79.15 euros in Frankfurt deals.