LONDON, Dec 4 (Reuters) - European stocks rallied strongly on Monday after the U.S. Senate passed a tax package delivering significant fiscal stimulus, which investors have been anticipating would give extra legs to the bull run in equity markets.
The tax overhaul delivered some relief in early European trading after benchmarks hit multi-week lows on Friday.
Strong gains in the U.S. dollar helped Germany's dollar-exposed DAX shoot up from a two-month low, last up 1.1 percent. The euro's strengthening has weighed on earnings expectations for stocks across the euro zone this quarter.
Bank stocks, seen as the biggest beneficiaries of tax cuts, led gains, up 0.9 percent on the day.
The pan-European STOXX 600 gained 0.7 percent while euro zone blue chips jumped 0.8 percent, set for their best gains in five weeks.
Autos stocks, which also have large exposures to the U.S., shot higher with Fiat Chrysler leading Italy's FTSE MIB, up 3.2 percent.
Elsewhere dealmaking moved some stocks. Denmark's largest insurer Tryg jumped 3.9 percent after agreeing to buy unlisted competitor Alka Forsikring.
Italian cable maker Prysmian meanwhile fell 2.9 percent after agreeing a $30 per share all-cash deal to buy Kentucky-based rival General Cable.
Chipmaker ams led European gains, up 4 percent after Barclays raised the stock to 'overweight'.
Peer Dialog Semiconductor however slipped 4.1 percent after the iPhone supplier said top customer Apple could be working on building its own power-management chips rather than procuring them from the German microchip maker.
Reporting by Helen Reid, Editing by Kit Rees