The pan-European STOXX 600 <.STOXX> index rose 1 percent, with Germany's DAX <.GDAXI> and France's CAC 40 <.FCHI> outperforming peers, gaining 1.3 to 1.4 percent.

The so-called Trump trade lifted European gains once again, with Europe's basic resources index <.SXPP> and banking index <.SX7P> both up 2.1 percent. The STOXX defence and aerospace index <.SXPARO> hit a new 19-month high, up 0.7 percent.

In his speech, Trump said he wanted to boost the U.S. economy with tax relief, an overhaul of the Affordable Care Act and an infrastructure push.

Meanwhile, comments from Federal Reserve policymakers suggesting rate-setters are worried about waiting too long in the face of pending economic stimulus from Washington raised expectations of a March U.S. interest rate rise.

Also driving European markets were PMI surveys showing that Eurozone factory activity rose to the fastest rate in nearly six years.

Earnings and dealmaking also had an impact, with Spain's Banco Sabadell, Spain's fifth-biggest bank, a top gainer, up 5.5 percent, after it said it had sold its Florida retail unit to Iberiabank Corp (>> IBERIABANK Corp) for $1 billion.

Irish building materials firm CRH (>> CRH PLC) was up 3.7 percent after the U.S.’s biggest producer of asphalt for highway construction, and third biggest supplier of ready-mixed concrete and construction aggregates posted strong earnings growth.

The firm was well positioned to benefit from increased infrastructure spending in the U.S. in the medium term, CEO Albert Manifold said. Shares in CRH had jumped 8.1 percent on the day of Trump's election.

The STOXX euro-zone banking index <.SX7E> gained 2 percent, boosted by higher expectations of a U.S. interest rate hike.

"Financials are rising mostly because the Fed signalled a rate hike in March is really on the table," said Jauke de Jong, an equities analyst at AFS Group.

Banks across Europe gained, with Credit Suisse, Raiffeisen Bank, Intesa Sanpaolo, Aareal Bank and Deutsche Bank (>> Deutsche Bank AG) among top gainers. Deutsche shares were up 4 percent and testing their highest levels in more than a year.

Rheinmetall (>> Rheinmetall AG) was a top gainer, hitting a near 10-year high after its better-than-expected results. ArcelorMittal (>> ArcelorMittal) was also a top gainer. The steel company's board confirmed Wilbur Ross resigned after his confirmation as U.S. Secretary of Commerce on Tuesday.

German plastics maker Covestro was the top faller, down 7.8 percent and headed for its worst ever day, after pharmaceuticals giant Bayer (>> Bayer AG) said it reduced its holding in the company from 64.2 percent to 53.3 percent.

Disappointing results weighed on some stocks. British hedge fund firm Man Group (>> Man Group PLC) was among the worst-performing stocks, down 6.8 percent, after a weak performance in some funds saw its fee income slide.

French industrials group Bollore (>> Bolloré) was down 3.7 percent and headed for its worst day in eight months after it posted a 4 percent fall in fourth-quarter turnover.

(Editing by Alexander Smith)

By Helen Reid