Trump has issued an executive order, citing national security grounds, that effectively bars Chinese giant Huawei from the US market.
Huawei was also added to a list that would make it much harder for the Chinese firm to access crucial US components, a move likely to ramp up tensions with Beijing as the two economic titans engage in a drawn-out trade war that threatens global business activity.
Eurozone stock markets were up well over one percent by the close, with London not far behind, mostly thanks to a weak pound.
On Wall Street the Dow was nearly 300 points higher in the late New York morning.
- 'Quite a couple of weeks' -
=============================
"It's been quite the couple of weeks on the trade war front," noted Craig Erlam, senior market analyst at Oanda trading group.
"We've gone from a deal being close to done, to talks collapsing and tariffs imposed and now Trump seeking to alleviate market concerns."
The Trump administration has for months tried to persuade allies not to allow China a role in building next-generation 5G mobile networks, warning that doing so would result in restrictions on sharing of information with the United States.
The announcement comes after the US last week hiked tariffs on $200 billion of Chinese goods, to which Beijing retaliated in kind, fanning fears their the trade war -- which seemed all but over just weeks ago -- could instead worsen.
In Hong Kong Thursday, the main stocks index ended flat, although ZTE -- another Chinese telecoms equipment provider -- shed more than six percent. Shanghai closed 0.6 percent higher.
On foreign exchange markets, the dollar recovered some losses triggered by speculation that the Federal Reserve could cut US interest rates to fend off the effects of the trade war and slowing economic growth.
Just months ago, some commentators had forecast up to three US rate hikes this year.
- May to leave? -
=================
"Depending on how long this standoff with China lasts, that impacts growth for longer and might force the Fed's hand," Esty Dwek, at Natixis Investment Managers, told Bloomberg TV.
"I wouldn't expect any big change in the short term, but the possibility of a cut much later in the year has risen."
Oil prices rose against the background of high Saudi-Iran tensions ahead of an OPEC meeting that is to take stock of the cartel's production cut deal.
The dollar was firmer against all its major rivals, but the British pound suffered a particularly strong decline amid intense speculation that Prime Minister Theresa May will step down if her next attempt to get parliament to approve her Brexit deal fails, dealers said.
"The pound tumbles as Theresa May looks set to leave in June," said Joshua Mahony, senior market analyst at IG.
"For markets this is ramping up the likeliness of a hard Brexit, as pushes for a more hardline Brexiteer to take over is raising fears that we could see the UK leave the EU without a deal in October," he said.
- Key figures around 1540 GMT -
===============================
London - FTSE 100: UP 0.8 percent at 7,353.51 points (close)
Frankfurt - DAX 30: UP 1.7 percent at 12,310.37 (close)
Paris - CAC 40: UP 1.4 percent at 5,448.11 (close)
EURO STOXX 50: UP 1.6 percent at 3,338.56
New York - Dow: UP 1.1 percent at 25,926.87
Tokyo - Nikkei 225: DOWN 0.6 percent at 21,062.98 (close)
Hong Kong - Hang Seng: FLAT at 28,275.07 (close)
Shanghai - Composite: UP 0.6 percent at 2,955.71 (close)
Euro/dollar: DOWN at $1.1175 from $1.1200 at 2050 GMT
Pound/dollar: DOWN at $1.2796 from $1.2840
Dollar/yen: UP at 109.94 yen from 109.58 yen
Oil - Brent Crude: UP $1.45 cents at $73.22 per barrel
Oil - West Texas Intermediate: UP $1.36 cents at $63.38 per barrel