Germany's DAX - the most sensitive to China and trade war fears - led the way with a 2.5 percent rise, hitting its highest level since Nov 14. The pan-European STOXX 600 climbed 1.9 percent, on track for its strongest day in eight months.

US President Donald Trump and Chinese premier Xi Jinping brokered a trade war truce at Saturday's G20 dinner, agreeing to halt additional tariffs with fresh talks aimed at reaching an agreement within 90 days.

Financials were the biggest boost to European shares as China-exposed bank HSBC rose and lenders across the region cheered the prospect of a détente in a trade war, which has dented world economic growth prospects.

Mining stocks led gains with a 5 percent rise as metals prices surged on the news which gives China, the world's biggest metals consumer, more wiggle room in the next few months.

Antofagasta, Anglo American, and Glencore were among the top European gainers, up 6.1 to 6.9 percent.

Car stocks, which have been battered by fears of rising tariffs, jumped 4.2 percent after Trump said that China had agreed to cut import tariffs on American-made cars.

German carmakers Daimler, BMW, and Volkswagen climbed 4.8 to 6.2 percent while auto suppliers also rose. Tyre maker Continental gained 4.1 percent and Faurecia was up 6.9 percent.

The oil sector also jumped 2.6 percent as crude soared on the trade war truce and ahead of this week's OPEC meeting, expected to result in a supply cut.

Luxury stocks highly sensitive to the Chinese economy were also among top gainers, with heavyweight conglomerate LVMH up 5.3 percent. Gucci owner Kering rose 6.2 percent.