In Germany, the Frankfurt DAX index topped 24,000 points for the first time, while Paris and London also gained in early afternoon deals.

Asian markets closed higher, with Hong Kong rising more than one percent and Shanghai and Tokyo both up.

"Renewed hopes for a ceasefire between Ukraine and Russia, combined with another wave of stimulus for China's economy has provided optimism," said Susannah Streeter, head of money and markets at Hargreaves Lansdown.

China's central bank cut two key interest rates to record lows on Tuesday as officials battle to kickstart the economic amid trade tensions with the United States and a persistent domestic spending slump.

The move came a day after data showed Chinese retail sales came in below expectations in April, highlighting a continued lack of confidence among consumers.

The dollar slightly extended losses owing to Moody's removal of the United States' last gold standard sovereign bond rating over a debt pile that could balloon further.

Following an initial sell-off, bonds stabilised and equities closed higher on Wall Street on Monday, as investors shrugged off the downgrade.

"The renewed rush for safe havens sparked by the US credit rating downgrade, has reversed, with gold falling back as investors have more appetite for equities," Streeter added.

Elsewhere, the Australian central bank cut its key interest to its lowest level in two years, citing steady progress in bringing inflation under control.

In company news, Chinese battery giant CATL ended its first day on the Hong Kong stock exchange over 16 percent higher, having raised US$4.6 billion in the world's biggest initial public offering this year.

A global leader in the sector, CATL produces more than a third of all electric vehicle batteries sold worldwide.

In Copenhagen, shares in renewables firm Orsted soared 15 percent after the Trump administration reversed an order to halt the construction of a huge wind firm off the New York coast by Norwegian energy company Equinor.

The sector also got a boost from the Danish government earmarking billions in aid to stimulate investment in a huge wind project.

- Key figures at around 1055 GMT -

London - FTSE 100: UP 0.6 percent at 8,753.68

Paris - CAC 40: UP 0.5 percent at 7,923.34

Frankfurt - DAX: UP 0.5 percent at 24,059.26

Tokyo - Nikkei 225: UP 0.1 percent at 37,529.49 (close)

Hong Kong - Hang Seng Index: UP 1.5 percent at 23,681.48 (close)

Shanghai - Composite: UP 0.4 percent at 3,380.48 (close)

New York - Dow: UP 0.3 percent at 42,792.07 (close)

Euro/dollar: UP at $1.1246 from $1.1244 on Monday

Pound/dollar: UP at $1.3364 from $1.3360

Dollar/yen: DOWN at 144.57 yen from 144.87 yen

Euro/pound: UP at 84.16 pence from 84.14 pence

West Texas Intermediate: DOWN 0.2 percent at $62.03 per barrel

Brent North Sea Crude: DOWN 0.2 percent at $65.41 per barrel

dan-ajb/bcp/rmb

MOODY'S CORP.

J.P. MORGAN CHASE & CO

BANK OF AMERICA

INDEX CORP.

Dow