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Europe accelerates to close sharply higher on Draghi

European stocks surged to close almost 3 percent higher after European Central Bank President Mario Draghi reiterated on Thursday that the central bank was ready to start "full-blown" quantitative easing.

In a letter made public, Draghi said the Governing Council would closely monitor the "risks to the outlook for price developments over the medium term".

Read MoreEuro tests low last seen at its birth in 1999

The pan-European FTSEurofirst 300 ended by 2.9 percent higher at 1,368.85, with all major sectors and bourses rallying after the letter. The CAC and the German DAX both rallied to provisionally close around 3.5 percent higher. London's FTSE 100 ended around 2.4 percent higher.

Symbol
Name
Price
 
Change
%Change
Volume
FTSE
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DAX
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CAC
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IBEX 35
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Retail stocks were the major outperformer, with Tesco shares closing nearly 15 percent. The U.K. grocer reported a drop in sales over the Christmas period but detailed a turnaround plan on Thursday, which included plans to cut overhead costs in the U.K. by 30 percent.

Rival U.K. supermarket chains like Sainsbury and WM Morrison also shot up on Thursday, although Marks & Spencer fell up to 4 percent after releasing disappointing sales data for its festive period.

Trading in Spain's Santander, the euro zone's largest bank by market value, was temporarily suspended on Thursday after the lender that it would raise 7.5 billion euros ($8.82 billion) in capital through an accelerated placement, and added that it was changing its dividend policy.

Read MoreTesco shares rally despite Christmas sales fall

U.S. stocks also surged on Thursday, extending the prior day's robust gains, as the price of oil steadied and on thinking the Federal Reserve and the European Central Bank would buttress the global economy.

Comments late Wednesday by Fed Bank of Chicago President Charles Evans helped the bullish slant, with Evans saying he did not believe the central bank should be in a rush to hike interest rates.

ECB stimulus ahead?

Dursun Aydemir | Anadolu Agency | Getty Images

Aside from individual stocks news, sentiment was boosted by data from the euro zone on Wednesday that showed the region's inflation rate fell into negative territory for the first time since 2009. The figures add more pressure on the ECB to launch a U.S. Federal-Reserve-style bond-buying program.

There has been resistance to any such a quantitative easing program from countries like Germany, however, and markets are now awaiting the outcome of the ECB's meeting on January 22 to see what the central bank will do. Aggressive stimulus could increase the search for yield and boost riskier assets like stocks—as such, the weak inflation data is being seen as positive by market participants.

On the data front, a euro area business confidence index for December fell to 0.04 versus a reading of 0.17 in November. Also, German factory orders on Thursday morning showed a sharp monthly fall in November, with new orders down 2.4 percent.

In the U.K., the Bank of England held interest rates at a record low as expected on Thursday. The central bank kept its benchmark base rate at 0.5 percent, where it has been since March 2009, and maintained its asset purchase target at £375 billion ($564 billion).

Read MoreBank of England keeps rates at 0.5%; ECB eyed

In corporate news, Standard Chartered will ax around 4,000 jobs worldwide at its retail banking division and, in addition, is closing its global equities business, according to an internal memo seen by Reuters on Thursday. Shares were higher by 1.9 percent before paring gains to close around 0.9 percent higher.