US President Donald Trump's widely expected trade announcement avoids the reimposition of sky-high levies and allows officials from Washington and Beijing to continue talking into November to settle their standoff.
Stock markets benefitted from easing fears of an all-out trade war between the world's two largest economies, analysts said.
"Although an agreement is yet to be agreed, the can has been kicked down the road and that is enough to maintain the market mood," noted Kathleen Brooks, research director at XTB trading group.
Asian equities rallied, with Tokyo's export-heavy stock index reaching an all-time peak.
London and Paris stocks also gained while Frankfurt fell nearing the half-way stage.
The pound held its ground after data showed the UK's unemployment rate remained at a four-year high in the three months to the end of June.
Traders awaited the latest US consumer price index (CPI) reading due Tuesday, which could play a major role in the Federal Reserve's next decision on interest rates.
Bets on a cut have ramped up in recent weeks owing to signs that the world's number one economy is showing signs of slowing, with figures indicating that the labour market softened considerably in the past three months.
But inflation is expected to have slightly accelerated in July and analysts warned that a forecast-topping figure could dent hopes of a rate cut.
Trump has pressed the independent Fed to slash rates and repeatedly lambasted its chairman, Jerome Powell, over its decisions to keep them unchanged.
Investors are also awaiting a summit between Trump and Russian leader Vladimir Putin on Friday, with the US president playing down the possibility of a breakthrough in ending the war in Ukraine.
In Asia, Tokyo's Nikkei 225 stocks index briefly soared almost three percent to hit a record high of 42,999.71 points on renewed optimism over the Japanese economy after officials reached a deal to avert the worst of Trump's tariffs.
With many of the president's tariffs set and talks with various trading partners ongoing, markets turned their focus towards the possible economic impact of Trump's trade war.
IwaiCosmo Securities said in a market commentary that "easing tensions over US-China trade talks, as well as speculation about the US's imminent lowering of (interest) rates" had helped boost investors' hopes about the recovery of Japanese companies.
The gains came as traders returned after a long weekend.
Sydney was also given a lift by news that the Australian central bank had cut interest rates.
- Key figures at around 1030 GMT -
London - FTSE 100: UP 0.2 percent at 9,145.76 points
Paris - CAC 40: UP 0.1 percent at 7,707.11
Frankfurt - DAX: DOWN 0.5 percent at 23,971.50
Tokyo - Nikkei 225: UP 2.2 percent at 42,718.17 (close)
Hong Kong - Hang Seng Index: UP 0.3 percent at 24,968.68 (close)
Shanghai - Composite: UP 0.5 percent at 3,665.92 (close)
New York - Dow: DOWN 0.5 percent at 43,975.09 (close)
Euro/dollar: DOWN at $1.1610 from $1.1617 on Monday
Pound/dollar: UP at $1.3459 from $1.3435
Dollar/yen: UP at 148.43 yen from 148.12 yen
Euro/pound: DOWN at 86.28 pence from 86.47 pence
Brent North Sea Crude: UP 0.4 percent at $66.89 per barrel
West Texas Intermediate: UP 0.3 percent at $64.16 per barrel
dan-ajb/bcp/lth
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