European shares finished up more than one percent.

Banks benefited from a report that global regulators are to given them a grace period before forcing the implementation of stricter capital rules.

That reduced concerns that lenders would need to issue huge amounts of shares in the near future.

Among the gainers were Deutsche Bank, Banco Santander, HSBC and BNP Paribas.

European investors were also encouraged by the fact that consumer prices in the US increased only marginally last month and that construction of new homes there rose in November, though by less than expected.

Energy and mining stocks were boosted by higher oil and metal prices, partly because of a weaker dollar but also due to optimism of improved demand as the recovery takes hold.

Drugmakers were also strong performers.

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