European shares have ended more than 2% higher ahead of a vote on a rescue bill for the housing market in the United States.
Automotive stocks also gained following strong results from Volkswagen, Peugeot and Fiat. Volkswagen was up 6.9%, Peugeot rose 9.2% and Fiat soared by 13.7% as the price of oil fell for the third consecutive session to $US126 a barrel.
Banks recorded their biggest one-day gain since mid-March with the DJStoxx European banking index rising 6.2%.
British lender HBOS soared 16.9% after market talk of bid interest from Spanish rival BBVA. Both banks declined to comment.
The FTSEurofirst 300 index of top European shares closed 2.06% higher at 1,188.99 points.
Across Europe: Germany's DAX rose 1.45% and France's CAC jumped 1.9%.
In Britain, the FTSE 100 ended up 85.8 points, 1.6%, at 5,449.9. The index is still down 15.5% to date this year.
Minutes of a policy meeting of the Bank of England on 9-10 July showed one policymaker wanted to raise interest rates and another wanted a cut.
But the remaining seven chose to keep them steady at 5% as both the inflation and economic growth outlook had deteriorated.
US markets
Stocks in the United States were little changed at midday on Wednesday.
Freddie Mac and Fannie Mae rose sharply, boosted by prospects in Washington for an agreement on a rescue plan for the housing market, including an emergency government lifeline for the two companies.
The housing sector is in its worst downturn since the Great Depression in the 1930s. The White House said President George Bush will sign the bill into law.
At midday on Wednesday, the Dow Jones industrial average was up 8.14 points, or 0.07%, at 11,610.64.
Standard & Poor's 500 Index was up 4.67 points, or 0.37%, at 1,281.67. The Nasdaq Composite Index was up 9.83 points, or 0.43%, at 2,313.79.
NZ & Australia
The NZX 50 index was up 57 points on Wednesday to 3201 on turnover of $124 million.
In the currency markets: the New Zealand dollar slipped overnight. 6.30am on Thursday, it was trading at US75.04 cents, 78.14 Australian cents, 37.55 pence, 80.96 yen and 0.4786 euro. The Trade Weighted Index was at 66.96.
The Australian share market closed up almost 2% after strong gains from the financial sector.
The S&P/ASX200 index was up 99.7 points, or 1.99%, to 5105.3, while the All Ordinaries was up 85.7 points, or 1.69%, to 5161.6.
On the Sydney Futures Exchange, the September share price index contract was 70 points higher to 5086 on a volume of 31,777 contracts.
