Reuters reports that the pan-European FTSEurofirst 300 index closed 0.5 percent higher at 1,288.8 points - a 4-1/2-year high - after jumping nearly 23 percent last year.
The rise was led by oil shares such as BP and Royal Dutch Shell, both up about 3 percent, supported by a 3 percent jump in crude oil prices to $63 a barrel. Oil rallied on fears that an unresolved row over the price Russia charges Ukraine for gas could yet affect supplies to Europe.
The FTSEurofirst index ended at its highest level since August 2001. Strategists at Lehman Brothers forecast a total return of 11 percent in European stocks this year, but trimmed their weightings, while adding to positions in UK markets.
"We would accept that the case for overweighting continental Europe is by no means as strong in local currency terms, as we believe interest rates are unlikely to be as helpful for a continental European overweight as they have been in the past," strategist Ian Scott said.
"The case for Continental Europe is not as strong as it was. We have added to our UK exposure in anticipation of lower rates and improved balance-of-earnings revisions," he said.