The FTSEurofirst 300 rose 1.4 percent to 1,009.20, after falling 0.5 percent in the previous session, taking it back up to levels last seen on June 22.

Euro zone banks, which have a big exposure to sovereign debt, put in a strong showing, rising 3.9 percent.

The market has had a torrid few days, dropping nearly 3 percent on expectations the summit - the 20th time EU leaders have met to try to resolve the debt crisis since it began in Greece in early 2010 - would amount to little.

But the leaders agreed that euro area rescue funds could be used to stabilise bond markets without forcing countries that comply with EU budget rules to adopt extra austerity measures or economic reforms.

The deal came after Spain and Italy earlier withheld support for a regional growth package.

"The most positive thing from this summit was that everybody came out claiming victory. The underlying tone, though, was one of threats," said Lex van Dam, hedge fund manager at Hampstead Capital, which manages $500 million of assets.

"It remains to be seen how this will solve the real issues as opposed to pushing them out further once again."

The Euro STOXX 50 volatility index, Europe's main gauge of anxiety known as the VSTOXX, shed 5 percent on Friday, as investor appetite for risky assets improved.

UK banks managed a relatively modest 1.2 percent rise, weighed by news Barclays, HSBC, Lloyds and RBS have all agreed to pay compensation to customers they misled about interest rate hedging products, following an investigation by Britain's financial regulator.

While the summit news has spurred a market bounce, addressing immediate concerns for stressed economies, traders said the relief, more pronounced given that expectations were so low going into the summit, could prove temporary.

"Although this had caught the markets a little off guard, the spike higher was a relatively minor move when you account for the market being considerably short at the time," Andrew Taylor, market strategist at GFT Global, said in a note.

"As the markets digest the impact of what has been announced we can expect some support to appear near term as traders adjust their short positions due to a change in the outcomes of the so called 'Non Event'."