By Tommy Stubbington 

Stocks in Europe rallied sharply Thursday, as investors welcomed the message from the Federal Reserve that it will be patient in deciding when next to raise interest rates.

The Stoxx Europe 600 index ended the session almost 3% higher on the day, spurred by a 2% surge for the S&P 500 on Wednesday after Fed Chairwoman Janet Yellen broached the prospect of "beginning to normalize" monetary policy. U.S. markets climbed further on Thursday and the S&P was up 1.5% at the European close.

Despite the hint that rate increases could be on the way next year, investors were reassured by the Fed's cautious language.

"The shift is a signal of confidence in the sustainability of the U.S. recovery," said Ian Williams, an economist and strategist at brokerage Peel Hunt.

"June still looks like the most likely date for a first rate hike," economists at BNP Paribas wrote.

In Europe, strategists additionally attributed the market strength to a recovery in oil prices. On Thursday Brent crude climbed as high at $63.70 per barrel, having hit a 5 1/2 -year low earlier this week of $58.50.

The Russian ruble, too, found further respite from its plunge in recent days, although trading remained volatile. The currency had began to recover on Wednesday as the market welcomed measures by the Bank of Russia to shore up the country's banks. In late trade Thursday it was 1.6% stronger on the day against the dollar at 61.06.

Against major currencies, Ms. Yellen's message gave the dollar a boost, pushing it to a 10-day high against the euro.

Elsewhere in currency markets, the Swiss franc weakened after the Swiss National Bank surprised investors by pushing interest rates into negative territory. The SNB's policy of capping the level of the franc has come under pressure with the recent weakening of the euro, pressuring the Swiss central bank to mimic the European Central Bank's policy of paying negative rates on deposits.

The franc fell back from the SNB's cap of 1.20 to the euro by 0.3%, trading at 1.2044.

"Price action over the last few days suggests the SNB might have had to purchase material amounts of euros to defend the 1.20 floor and this may have triggered the move today," said Beat Siegenthaler, a currency strategist at UBS.

Elsewhere, Greek markets shrugged off the government's failure to win enough support in the first round of parliamentary voting for a new president on Wednesday, a move that could force the country into snap elections.

Athens' main stock index rose 1.5%.

Write to Tommy Stubbington at tommy.stubbington@wsj.com and Josie Cox at josie.cox@wsj.com

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