By Ankika Biswas and Amruta Khandekar
(Reuters) -European shares rose on Wednesday, lifted by positive cues from U.S. Federal Reserve Chair Jerome Powell's overnight remarks as well as upbeat earnings from energy and chemicals firms.
The pan-European STOXX 600 closed 0.3% higher having retreated from nine-month highs hit earlier in the session after other Fed policymakers sounded a more hawkish tone.
Powell's remarks on Tuesday, in which he again referred to the process of "disinflation", were interpreted as less hawkish than feared by markets still reeling from the shock of Friday's surprisingly strong U.S. labour data.
"Right now, investors appear to be focusing more on Powell acknowledging disinflationary forces taking hold, rather than his concern about the latest jobs reading," said Susannah Streeter, a markets analyst at Hargreaves Lansdown (LON:HRGV).
Meanwhile, New York Federal Reserve President John Williams and Fed Governor Lisa Cook said restrictive monetary policy was still needed to tackle inflation.
The European Central Bank (ECB) may extend its streak of large interest hikes into May if core inflation doesn't ease by then, ECB policymaker Klaas Knot said on Wednesday.
"The Fed is not quite ready to cut rates. The ECB is more hawkish than all the other (major central banks), because of inflation being more of a problem in the euro area," said Andrea Cicione, head of strategy at TS Lombard.
Signs of economic resilience and better-than-feared corporate earnings have helped European stocks rebound with around an 8% gain this year, after the aggressive global rate-hiking cycle saw them notch their steepest annual decline since 2018.
Of the 93 STOXX 600 companies that have reported earnings so far, more than half have beaten market expectations, according to Refinitiv data.
The energy sector, up 1.7%, was the top gainer in Europe, boosted by a 10.6% rise in Finnish refiner Neste and a 6.8% gain in Norwegian oil and gas producer Equinor after fourth-quarter earnings beats.
Upbeat earnings also drove a 1.2% gain in chemicals stocks.
Dutch paints maker Akzo Nobel jumped 1.0% after projecting lower raw material costs, while shares of Yara rose 3.4% after the fertiliser maker beat quarterly earnings forecasts.
Germany's Linde climbed 3.0%, extending gains, after the world's largest industrial gases company on Tuesday forecast higher 2023 earnings.
Limiting the upside for the STOXX 600, Societe Generale (EPA:SOGN) fell 5.0% after France's third biggest bank hiked provisions for bad loans fivefold.
Jewellery maker Pandora rose 10.6% on better-than-expected fourth-quarter results while Sweden's Handelsbanken slumped 8.6% after proposing a lower-than-expected payout for shareholders.