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European stocks rallied to a week's high on Friday as Britain and the European Union announced a breakthrough in Brexit negotiations and new global banking regulations appeared kinder to European banks than had been expected.
The European Commission said enough progress had been made after it worked through the night with the UK to end an impasse over the status of the Irish border, which had scuppered an earlier attempt to clinch a deal on Monday.
Financials lifted the pan-European Stoxx 600 0.8 percent by 0923 GMT, with the banking index up 2.6 percent at a five-week high.
Among the top gainers were ABN Amro, up 5.7 percent; Lloyds, up 4.5 percent and Danske Bank, up 4.4 percent.
Policymakers announced a compromise late on Thursday on rules forcing banks to hold more capital and cash, capping a decade of efforts to make banks more resilient and avoid a repeat of the 2008 financial crash.
The rules will only come into full force by the start of 2027, and local supervisors will have the power to mitigate the impact of the new measures during the phase-in period.
"This appears to be a far better outcome than we and the market had feared," wrote Citi analyst Simon Nellis, keeping his "overweight" rating on European banks.
"This is a big positive for all European banks, which should now be able to quantify excess capital and M&A budgets in due course, with Benelux, French and Nordic banks best placed to benefit from this announcement."
Britain's export-oriented FTSE lagged its continental peers, up just 0.2 percent, as the pound rose on the Brexit breakthrough.
The more dramatic European share moves came again from accounting scandal-hit furniture retailer Steinhoff, which plunged another 41 percent after Moody's downgraded it to junk before bouncing back to trade 5.7 percent higher, still down 81 percent on the week.
"The shares are a pure gamble now," said one Frankfurt-based trader. "Nobody knows what's going on at Steinhoff at the moment."
UK builder Berkeley Group was the top European gainer, up 8.5 percent after it raised its profit guidance for the next five years.