"Equity markets in Europe are driving higher on talk there has been progress in relation to the coronavirus situation," said David Madden, analyst at CMC Markets UK.
Asian posted gains following new record highs overnight on Wall Street, which continued to move higher at the open on Wednesday.
Sky News reported that a UK research team working on a coronavirus vaccine had made a "significant breakthrough".
Professor Robin Shattock at Imperial College London told the broadcaster he was ready to begin testing the vaccine on animals next week.
"US futures and European stocks gained and Treasuries tanked as virus optimism ran wild on reports that a key breakthrough was made in the search for a coronavirus cure," noted Edward Moya, senior market analyst at Oanda trading group.
At the same time, European Central Bank chief Christine Lagarde said that the novel coronavirus in China and beyond presents "a new layer of uncertainty" for the European economy.
Traders however took heart from the fact that the virus' spread outside China had not spiralled.
Briefing.com analyst Patrick O'Hare said "the stock market has remained resolute in its determination that any economic impact caused by the coronavirus will be short-term in nature" despite a number of firms acknowleging their operations in China would be impacted.
European planemaker Airbus was one of the latest, saying Wednesday that it has shut its factory outside Beijing that carries out the final assembly of its A320 and A330 planes.
Meanwhile, moves by Chinese authorities to support mainland stocks were also providing cheer, with the central bank pumping more than $200 billion into financial markets and the government easing restrictions on equities trading.
National Australia Bank analyst Rodrigo Catril said stock market gains after virus-linked losses last week had been "spurred by China's efforts to support its economy alongside an apparent decline in concerns over the coronavirus impact on the global economy".
The rally in riskier assets saw investors shift out of safer investments such as gold and yen, dealers said.
Elsewhere Wednesday, sterling gained after data showed British services activity reaching a 16-month high.
"The final reading of the services PMI report for January was 53.9, topping the 52.9 forecast," said Madden.
"The services sector accounts for roughly 75 percent of the UK's economic output, so the jump in activity bodes well for the economy" as the British government works to seal post-Brexit trade deals.
London - FTSE 100: UP 0.8 percent at 7,502.54 points
Frankfurt - DAX 30: UP 1.6 percent at 13,487.56
Paris - CAC 40: UP 1.1 percent at 5,998.40
EURO STOXX 50: UP 1.4 percent at 3,782.65
New York - DOW: UP 1.0 percent at 29,089.64
Shanghai - Composite: UP 1.3 percent at 2818.09 (close)
Hong Kong - Hang Seng: UP 0.4 percent at 26,786.74 (close)
Tokyo - Nikkei 225: UP 1.0 percent at 23,319.56 (close)
Euro/dollar: DOWN at $1.1005 from $1.1044 at 2200 GMT
Pound/dollar: DOWN at $1.2967 from $1.3031
Euro/pound: UP at 84.79 pence from 84.76 pence
Dollar/yen: UP at 109.79 yen from 109.52 yen
Brent Crude: UP 2.7 percent at $55.42 per barrel
West Texas Intermediate: UP 2.7 percent at $50.94 per barrel