The pan-European STOXX 600 index rose 0.6 percent, not enough to turn it around from its worst week in six months. Britain's FTSE <.FTSE> and euro zone blue chips <.STOXX50E> also gained 0.4 and 0.7 percent respectively.
While gains were spread across all sectors, financials - among the most hit by this week's sell-off - gave the biggest boost to the STOXX with heavyweight banks BNP Paribas (>> BNP Paribas) and UniCredit (>> UniCredit SpA) up 2 percent.
Spain's Banco Popular (>> Banco Popular Espanol SA) jumped 10 percent after sources said Santander or Bankia were likely to acquire the bank, which is struggling to clean up soured property assets.
The bank propelled Spain's IBEX <.IBEX> up 1.4 percent.
Among the biggest movers was airport retailer Dufry (>> Dufry AG), up 5 percent after luxury group Richemont (>> Compagnie Financiere Richemont SA) bought a 5 percent stake in the company.
German utility RWE (>> RWE AG) jumped 5.4 percent after sources said it was considering merging with France's Engie (>> Engie S.A.). The firms are considering a share swap to create Europe's first truly cross-border utility.
Engie shares were up 0.6 percent, while RWE's majority-owned Innogy (>> Innogy SE) gained 3.4 percent on the news.
South African retail group Steinhoff (>> Steinhoff International Holdings NV) jumped 7.2 percent as investors gave a warm reception to plans to spin off its African retail business.
This week's losses have pulled the STOXX down from 21-month highs hit after a run driven by big inflows into Europe, solid economic data and surprisingly strong corporate earnings.
With 80 percent of European companies having reported so far, 65 percent of them have beaten expectations and 8 percent have met them, according to I/B/E/S data.
After the latest company updates, however, first-quarter earnings growth is seen at 19.4 percent, slightly below the over 20 percent previously forecast.
Easing fears about the euro zone's stability after the defeat of a eurosceptic candidate in the French presidential vote this month added fuel to the recent rally.
Flows data from Bank of America Merrill-Lynch showed investors remained strongly bullish on Europe, with the region's equity funds drawing inflows for the eighth straight week, while investors rushed out of U.S. stocks.
On the same front, some investors welcomed developments in Greece, where lawmakers approved further austerity measures overnight, making more progress towards unlocking bailout funds.
"No doubt averting another Greek crisis or at least another stand-off between the Greek government and its creditors should help stocks," London Markets trader Markus Huber said.
Athens stocks <.ATG> were up 0.2 percent.
Elsewhere, companies with exposure to Brazil such as Casino (>> Casino Guichard), Telefonica (>> Telefonica SA) and Telecom Italia (>> Telecom Italia SpA) steadied following losses in the previous session triggered after a bribery scandal hit the country's president, darkening the outlook for structural reforms there.
(Reporting by Danilo Masoni and Helen Reid; Editing by Gareth Jones)
By Danilo Masoni and Helen Reid
Stocks treated in this article : BNP Paribas
, Casino Guichard
, Engie S.A.
, Telefonica SA
, Banco Santander, S.A.
, Telecom Italia SpA
, Dufry AG
, RWE AG
, Roche Holding Ltd.
, Hikma Pharmaceuticals Plc
, Bankia SA
, Banco Popular Espanol SA
, Compagnie Financiere Richemont SA
, UBS Group AG
, Steinhoff International Holdings NV
, Innogy SE
, UniCredit SpA