The South China Morning Post, citing sources, said Washington and Beijing were laying out an agreement that would help avert the next round of tariffs on an additional $300 billion of Chinese imports.
The news eased investor nerves heading into the highly anticipated G20 summit, where the two sides will try to resolve a drawn out dispute that has roiled markets for the past year and resulted in the STOXX 600 posting its worst monthly performance in over two years in May.
Germany's trade-sensitive DAX jumped 0.70% and helped charge a 0.26% gain in the pan-European STOXX 600 index by 0755 GMT.
"There seems to be some optimism about trade talks between Xi and Trump over the weekend and the possibility that there will be a deal or in any case Trump will not impose tariffs on all Chinese imports," said Simona Gambarini, a markets economist at Capital Economics in London.
The STOXX 600 is set to post its first weekly loss this month, as heightening tensions between U.S. and Iran, trade uncertainty between the world's two largest economies and a less than expected dovish message from the Federal Reserve pressured markets this week. Still, the benchmark index is up nearly 4% in June recouping most of May's sell-off.
Bayer surged 6.2% after the group hired a lawyer and formed a committee to address glyphosate litigation and as activist shareholder Elliott Associates revealed a 1.1 billion euros stake.
The biggest gainer on the STOXX 600 index was H&M, up 10.3% after the Swedish fashion retailer said sales of its summer collections had gotten off to a good start and that it was selling more clothes at full price.
Its upbeat note drove a 1.80% rise in the retail sector, which was closely followed by the auto sector's 1.4% gain and the basic-resources sector's 1.3% rise as the tariff reprieve triggered relief for companies most at risk from slower global trade.
On the flip side, Chr Hansen tumbled 12.1% after the Danish food ingredients maker cut its revenue outlook for the year, hit by a disappointing performance at its food colouring and animal health businesses in the latest quarter.