The pan-European Stoxx 600 ended 1.06 percent higher with major markets and almost all sectors in positive territory. Shares of banking stocks pushed higher led by Unicredit. The largest Italian lender by assets said on Tuesday that it's launching a 13 billion euro ($13.83 billion) cash call in the first quarter of 2017. Its shares closed up by 15.9 percent.
Meanwhile, investors seemed confident that a solution for the embattled Monte dei Paschi will be found. Its shares continued to rise on Tuesday, closing more than 1.29 percent higher. The European Commission reiterated on Monday that is willing to discuss options for Italian banks and that state support is available within EU rules.
Elsewhere, the Italian media company Mediaset accused the French rival Vivendi of attempting a hostile takeover, after the latter announced it could increase its holding to as much as 20 percent. Vivendi shares were slightly higher at the close while Mediaset shares had been temporarily suspended from trading after rocketing up 36 percent. The media company ended more than 31 percent higher on Tuesday.
Meanwhile in the U.S., the Dow Jones industrial average continued in positive territory with the Nasdaq hitting a record high following a remarkably bullish run since Donald Trump was elected president.
Basic resources were down by 1.82 percent at the close despite positive numbers coming from China. Data overnight showed the country's November steel output jumping 5 percent on the year.
The recently appointed Italian Prime Minister Paolo Gentiloni has unveiled the names for his caretaker government, keeping most of the ministers from the executive led by Matteo Renzi.
President-elect Donald Trump nominated Rex Tillerson, Exxon Mobil chief executive officer, as his first choice for secretary of state on Tuesday despite criticism concerning the oilman's lack of diplomatic experience and, perhaps most notably, his close ties with Russia.
In terms of data, inflation hit a 25-month high in November in the U.K. Prices grew 1.2 percent on the year during November, the fastest pace since October 2014.
In Germany, inflation remained unchanged in the month of November at 0.8 percent year-on-year, in line with the consensus.
The employment rate in the euro area went up by 0.2 percent in the third quarter of 2016, Eurostat reported on Tuesday. Compared to the same period a year ago, the employment rate increased 1.2 percent.