London-listed mining groups Rio Tinto, BHP Group and Glencore provided the biggest boost, sending the broader mining index up 4.0% on the back of stronger metal prices.

Oil majors BP and Total gained about 2% as oil prices surged on a drop in U.S. crude inventories and a weak dollar.

The broader pan-European STOXX 600 index ended 0.5% higher, with London's commodity-heavy FTSE 100 rising 1.1% and Germany's DAX up 0.5%.

"Equity markets rallied alongside continued strength in precious metals," Stephen Gallo, European head of FX strategy, said in a note. "The headline PMI numbers from Europe certainly did not harm risk assets."

IHS Markit's final reading of euro zone business activity showed the bloc returned to modest growth in July as coronavirus restrictions were lifted. Separate data showed the volume of retail sales rebounded in June to levels recorded in February.

The numbers, along with some positive earnings reports, helped investors look past a worsening of diplomatic ties between the United States and China and rising COVID-19 cases in parts of Europe and the United States.

In earnings-driven moves, German logistics group Deutsche Post AG gained 2.5% after reporting a better-than-forecast rise in operating profit, benefitting from a jump in ecommerce during the pandemic.

Chipmaker Dialog Semiconductor rose 9.1% after posting second-quarter revenue above its previous estimate, while residential real estate company Vonovia was up 3% having confirmed its guidance for the year.

Travel & leisure stocks extended gains for a third straight session, with British Airways-owner IAG, Lufthansa and Easyjet up between 6.5% and 10.5%.

"Manufacturing PMIs earlier this week are certainly helping the cyclical story, but there is temporary nature to the current outperformance," said Edward Park, deputy chief investment officer at Brooks Macdonald Asset Management.

Among the decliners, BMW fell 3.5% as a 25% fall in deliveries of luxury cars during lockdowns pushed the carmaker to a second-quarter operating loss.

Defensive sectors such as food & beverage <.SX3P>, healthcare and telecoms, which tend to decouple from the economic cycle, also fell, knocking 0.6% off the Swiss equities index which is heavy on such companies.

By Sruthi Shankar