The pan-European STOXX 600 index gained 0.9 per cent in the first trading session of June, with UK’s blue-chip index rising 1.1 per cent after a holiday on Monday.
The German DAX jumped 1.3 per cent to a new record high, while France’s CAC 40 added 0.7 per cent.
IHS Markit’s final reading of euro zone’s factory activity rose to 63.1 in May, above an initial 62.8 “flash” estimate and the highest since the survey began in June 1997.
The survey suggested growth would have been even faster without supply bottlenecks that have led to an unprecedented rise in input costs.
While investors worry that higher inflation could force the European Central Bank to dial back its stimulus measures, policymakers have said in recent weeks that the rise in prices is transitory and have reaffirmed continued support.
“We’ve had the Fed and ECB say they expect a surge in inflation as economies open up,” said Keith Temperton, a sales trader at Forte Securities.
“It will become a problem once the economies have opened up and numbers continue higher. Until then, the market is embracing what we’re seeing.”
Euro zone consumer prices data for May is due later in the morning. Data on Monday showed Germany’s annual consumer price inflation accelerated in May, advancing further above the ECB’s target of close to but below 2 per cent.
Miners such as Anglo American, BHP Group and Glencore climbed nearly 4 per cent each, giving the biggest boost to the STOXX 600 as prices of copper and other metals rose.
Oil majors BP, Royal Dutch Shell and Total inched up as Brent crude futures topped $70 per barrel to trade at its highest since March on optimism over fuel demand outlook.
The benchmark STOXX 600 ended May with a 2 per cent gain, its fourth straight monthly rise as optimism about economic reopening drove investors toward economically sensitive sectors such as materials and energy.
German carmaker Daimler rose 2.7 per cent after it agreed to pay Nokia for using its patents, ending a row over royalties for key technologies.
Warsaw-listed CD Projekt SA fell 8.5 per cent as its quarterly profit fell by more than half as its flagship game, “Cyberpunk 2077,” was kept off Sony’s PlayStation Store.
