The positive sentiment that started in Asia carried on following strong earnings from Dell and Abercrombie & Fitch in the U.S. and from French bank Societe Generale and Dutch brewer Heineken.
"Forecast-beating numbers have helped maintain upward momentum on both sides of the Atlantic," said Will Hedden, a sales trader at IG Index.
In Europe, the FTSE 100 index of leading British shares closed up 48.19 points, or 0.8 percent, at 6,085.27 while Germany's DAX rose 0.2 percent to 7,414.30. The CAC-40 in Paris ended 40.92 points, or 1 percent, higher at 4,151.26.
In the U.S., the Dow Jones industrial average was up 55 points, or 0.5 percent at 12,257 around midday New York time, while the broader Standard & Poor's 500 index rose 7.06 points, or 0.5 percent, at 1,335.05.
The earnings helped allay concerns that the U.S. economy is now joining other countries in exhibiting inflationary pressures. Those concerns were stoked by figures showing that U.S. prices at the factory gate are rising at their fastest pace in over two years.
The Labor Department reported that its core Producer Price Index, which excludes food and energy costs, rose by 0.5 percent in January. That's more than double expectations for a 0.2 percent and represents the biggest gain since October 2008.
News of the increase comes a day after a surge in import prices on the back of higher energy and commodity costs and is likely to fuel concerns that the U.S. may be about to face the same sort of inflationary spike that is clearly evident in Europe and China.
It also came ahead of the release of the minutes to the last rate-setting meeting of the Federal Reserve, where policymakers kept the main interest rate unchanged at near zero percent as well as maintaining the $600 billion monetary stimulus program.
"This may force the Fed to reconsider its position that inflation is not a serious threat this year," said Michael Woolfolk, an analyst at the Bank of New York Mellon. "While this will not be reflected in today's minutes, the Fed will need to modify its language going forward to allow more room to maneuver in the event that core inflation continues to increase at a faster than expected pace."
Ahead of the minutes, the euro was 0.4 percent higher at $1.3555 while the dollar was 0.1 percent lower at 83.65 yen.
Rising inflation figures around the world, following a spike higher in energy and food costs, have ratcheted up expectations that the world's leading central banks may be about to signal that the super-loose phase in global monetary policy, which has lasted for around three years, is coming to an end.
In Britain, borrowing costs look like they're going to be rising this year, if the Bank of England's latest quarterly economic forecasts - published Wednesday - are any guide. According to the Bank, inflation is only expected to fall back from the current 4 percent rate towards the 2 percent if interest rates rise as markets expect.
However, the Bank estimates only predict two quarter point rate hikes this year, instead of the three increases priced in by financial markets. That difference has sent the British pound falling on the foreign exchange markets.
"Such guidance has disappointed current market expectations which had moved to discount even more aggressive tightening ahead than assumed in the inflation report projections," said Lee Hardman, a currency economist at the Bank of Tokyo-Mitsubishi UFJ.
By late afternoon London time, the pound was trading 0.5 percent lower on the day at $1.6059.
Earlier, Japanese stocks struck a ten-month high as the yen weakened to two-month lows against the dollar, with the Nikkei 225 stock average in Tokyo adding 0.6 percent to close at 10,808.29 - its highest level since April 30.
Elsewhere in Asia, Hong Kong's Hang Seng rose 1.1 percent to 23,156.97.
In mainland China, the benchmark Shanghai Composite Index gained 0.85 percent to 2,923.90, while the Shenzhen Composite Index rose 1.7 percent to 1,283.26.
Benchmark crude for March delivery was up 24 cents at $84.57 a barrel in electronic trading on the New York Mercantile Exchange.
Pamela Sampson in Bangkok contributed to this report.