At the close of European trade, the EURO STOXX 50 added 0.44%, France’s CAC 40 added 0.31%, while Germany’s DAX 30 soared 1.07%.
The European Central Bank left its benchmark interest rate unchanged at a record low for the fifth consecutive month in December, it announced on Thursday.
The ECB said it was maintaining the benchmark interest rate at a record-low 0.75%, in line with market expectations.
The central bank also left its marginal lending and deposit facility rates unchanged at 1.50% and 0.0% respectively, as widely expected.
Official data showed that German factory orders rose by a seasonally adjusted 3.9% in October, blowing past expectations for a 0.9% gain.
September’s figure was revised to a 2.4% drop from a previously reported decline of 3.3%.
Investor confidence also strengthened after U.S. President Barack Obama said a deal to avert the so-called fiscal cliff of year-end tax hikes and spending cuts was possible in "about a week" if Republicans compromise on taxes.
Financial stocks remained broadly higher, as shares in French lenders BNP Paribas and Societe Generale rose 0.95% and 0.14%, while Germany's Commerzbank climbed 0.71%.
Deutsche Bank underperformed on the other hand, with shares declining 0.29%, after the Financial Times reported that three former employees told U.S. regulators that the German lender covered up paper losses of as much as USD12 billion during the financial crisis. The bank disputed the allegation.
Elsewhere, GDF Suez dove 11.77% after the company said in a statement late Wednesday that recurring net income will be EUR3.1 billion to EUR3.5 billion euros in 2012, below expectations.
In London, FTSE 100 added 0.16%, after the Bank of England kept its benchmark interest rate unchanged for the 45th consecutive month in December and announced no change to its asset purchase facility program.
Mining company Antofogasta continued to lead gains, surging 3.43%, while copper producers Xstrata and Kazakhmys advanced 1% and 0.88% respectively.
Meanwhile, financial stocks were mixed, as shares in Lloyds Banking and HSBC Holdings slipped 0.17% and 0.03%, while the Royal Bank of Scotland and Barclays rallied 0.56% and 1.05%.
Barclays said earlier that it will increase its stake in South Africa’s Absa Group Ltd. The U.K. lender will receive shares worth USD2.1 billion in return for merging operations across Africa.
In midsession U.S. trade, the Dow Jones Industrials were down 0.08%, the broad based S&P 500 was flat, and the tech heavy Nasdaq traded higher by 0.34%
Investors are awaiting non farm payrolls and consumer sentiment from the U.S. on Friday.