European shares rose on Thursday as benign inflation data cemented bets of a U.S. rate cut in September and gains in insurer Admiral added to the upbeat mood.
The pan-European STOXX 600 had risen 0.2% to trade near a two-week high and was on track for a third straight session of gains.
The insurance sector rose 0.5%, boosted by a 6.7% rise in Admiral after the British motor and home insurer posted a better-than-expected 32% jump in first-half pre-tax profit.
Mild U.S. inflation readings this week have cemented hopes that the Federal Reserve will lower borrowing costs in September for the first time in 4-1/2 years.
Traders are now split on whether policymakers will opt for a super-sized 50-basis-point reduction or a normal 25 bps cut.
"We're going to get probably a 25 bps cut because that is how central banks have always worked. However, if they deliver a 50 bps cut - it has huge merit and can avert a recession," Manish Singh, chief investment officer at Crossbridge Capital said.
The 'fear gauge', the Euro STOXX volatility index, returned to levels seen before the market's risk-off sentiment that began in the first week of August.
It hit a low of 15.82 points, dipping below the lows of August 1 and reflecting a more optimistic and improved investor mood.
However, a veil of caution still hung in the air, with investors awaiting the arrival of further economic data, including the release of U.S. retail sales figures and weekly jobless claims data at 8:30 a.m. ET (1230 GMT).
The tech sector, one of the most affected during the early August stock rout, was the top gainer among sectors in the current session, rising 0.5%.
Meanwhile, data earlier in the day showed that Britain's economy grew 0.6% in the second quarter, in line with economists' expectations.
The benchmark FTSE 100 was trading flat. [.L]
Among other individual stocks, Adyen gained 6.3% after the Dutch payments company beat half-year core profit expectations.
Orsted lost 7.7% after the world's biggest offshore wind farm developer reported its second-quarter results.
Geberit fell 3.7% after the Swiss plumbing materials supplier announced its full-year outlook that was below analyst expectations.
(Reporting by Pranav Kashyap in Bengaluru; Editing by Subhranshu Sahu and Janane Venkatraman)
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