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Trump and European Commission chief Jean-Claude Juncker announced a plan to ease trade tensions after talks on Wednesday at the White House.
The plan was well received, with ECB chief Mario Draghi calling it "a good sign", although EU heavyweight France sceptically asked for "clarifications".
The dollar gained against the euro after the plan, helping to boost eurozone equities.
Frankfurt stocks led the way, with Paris showing lesser gains.
"European carmakers are higher ... in the wake of the constructive meeting between President Trump and the European Commission's Jean-Claude Juncker," CMC Markets analyst David Madden told AFP.
London was a touch higher at the close, held back by a strengthening pound against the euro and some weak corporate results, while the Dow index in New York also showed gains approaching midday in New York.
FACEBOOK'S REALITY CHECK
The Nasdaq, however, slipped as Facebook shares collapsed after the company warned of weaker growth.
They plummeted 19 per cent, wiping out some US$100 billion - believed to be the worst single-day evaporation of market value for any company.
Ahead of Draghi's trade comments, the ECB left interest rates unchanged at a regular meeting and said its planned exit from massive stimulus measures was on track.
Frankfurt-listed shares in Volkswagen, BMW and Daimler all gained ground, while in Paris Peugeot-owner PSA and Renault also pulled away with solid increases.
"Going into the meeting, Trump was talking about imposing 25 per cent tariffs on EU cars, and now a trade war has been averted," Madden said.
"Both sides agreed to work towards lowering trade barriers, and traders are taking this as a sign that Mr Trump won't be imposing hefty tariffs on EU cars. No agreement has been put in place, but this is a step in the right direction," Madden added.
US tariffs on autos would hurt the German car industry in particular.
STEEL NEXT?
Trump and Juncker also vowed to look at existing duties on steel and aluminium imposed by the US that had angered the EU.
Trade disputes have been rattling markets, sparking fears of an all-out global trade war.
"News that US president Trump has decided to refrain from imposing car tariffs on EU automakers has unsurprisingly been warmly greeted on the continent with shares in the sector moving firmly higher," XTB analyst David Cheetham told AFP.
"Talk of tariffs as high as 25 per cent on cars imported into the US had presented a major threat to the level of demand for EU manufacturers, in what is a key market for them.
"The latest developments suggest that this is no longer as large a concern."
Asian stocks however mostly fell on Thursday as investor relief was offset by disappointing Wall Street earnings.
Most of the region's exchanges fell with analysts blaming the lacklustre US results from companies including social networking giant Facebook and carmakers.
Back in Europe, Airbus shares rose around four percent after the European air giant said its half-year profits plunged, but confirmed its objective to provide 800 aircraft this year despite "risks".
Key figures at 1535 GMT:
London - FTSE 100: UP 0.1 per cent at 7,663.17 points (close)
Frankfurt - DAX 30: UP 1.8 per cent at 12,809.23 (close)
Paris - CAC 40: UP 1.0 per cent at 5,480.55 (close)
EURO STOXX 50: UP 1.2 per cent at 3,508.77
New York - Dow: UP 0.5 per cent at 25,550.85
Tokyo - Nikkei 225: DOWN 0.1 per cent at 22,586.87 (close)
Hong Kong - Hang Seng: DOWN 0.5 per cent at 28,781.14 (close)
Shanghai - Composite: DOWN 0.7 per cent at 2,882.23 (close)
Euro/dollar: DOWN at US$1.1663 from US$1.1729 at 2100 GMT
Pound/dollar: DOWN at US$1.3149 from US$1.3189
Dollar/yen: UP at 111.06 yen from 110.98 yen
Oil - Brent Crude: UP 45 cents at US$74.38 per barrel
Oil - West Texas Intermediate: UP 50 cents at US$69.80 per barrel
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