By Ambar Warrick
(Reuters) - European shares closed higher on Wednesday as signs of a recovery in global manufacturing activity helped chemical and industrial stocks, while the tech sector marked its strongest close in more than 19 years, tracking gains on Wall Street.
The pan-European STOXX 600 index <.STOXX> rose 1.7% after closing lower for the past four sessions.
The chemicals sector <.SX4P> ended at a record high as positive manufacturing data from the euro zone, United States and China this week pointed to a recovery in global factory activity.
Local technology stocks <.SX8P> mirrored gains in their U.S. peers, ending at their strongest level since 2001. The sector has been more resilient than most through the pandemic, having turned positive for the year by early July.
Still, weak inflation data and the lack of clear progress against the pandemic augured an uneven economic recovery, fears of which have kept the STOXX 600 in a tight trading range since June.
Graphic: STOXX 600's trading range - https://fingfx.thomsonreuters.com/gfx/mkt/xegpboqlnvq/STOXX600%20trading%20range.PNG
"Weak inflation data may have increased the chances for the ECB to expand its efforts to stimulate the Euro-area economy," Charalambos Pissouros, senior market analyst at JFD Group, wrote in a note, referring to the negative inflation reading from the euro zone on Tuesday.
"With central banks and governments around the globe staying willing to do whatever it takes to support their economies from the effects of the pandemic ... we would still consider the latest retreat in most equity indices as a corrective phase."
Data on Wednesday showed that German retail sales fell unexpectedly in July, dashing hopes that household spending in Europe's largest economy will be powerful enough to drive a strong recovery in the third quarter. But German stocks <.GDAXI> rose more than 2%.
In corporate news, Barratt Developments Plc <BDEV.L>, Britain's biggest housebuilder, surged 8.7% after it flagged an improvement in forward sales, despite reporting a near 30% fall in annual housing completions and revenue.
The stock was the best performer in the personal and household goods sector <.SXQP>, which led gains among its European peers for the day.
Italian infrastructure group Atlantia <ATL.MI> topped the STOXX 600 on hopes that it would clinch a deal over its motorway unit Autostrade per l'Italia.
Belgian real estate firm Aedifica <AOO.BR> rose 4% after it clocked strong rental income growth over the 12 months to June 30.
European banks, however, <.SX7P> lagged their peers, retreating 0.7% as uncertainty over the pandemic seemed likely to create a shaky credit environment.
(Reporting by Ambar Warrick in Bengaluru; Editing by Saumyadeb Chakrabarty and Nick Tattersall)