By Shristi Achar A and Shashwat Chauhan
(Reuters) -European shares gained on Wednesday, led by technology stocks including Dutch semiconductor equipment maker ASML (AS:ASML), with focus shifting to the European Central Bank's key rate decision later this week.
The pan-European STOXX 600 closed 0.8% higher after falling around 0.5% in the last session, with the technology sector leading the charge with an 3.7% gain, its best single-day performance in more than four months.
ASML jumped 8.1% after a Jefferies analyst report cited comments from CFO Roger Dassen suggesting he was positive about the possibility of orders coming through from top customer TSMC in the coming quarters.
Other chip-related stocks BE Semiconductor Industries (AS:BESI) and ASMI were up 4.7% each.
Investors are now focused on the ECB's key interest rate decision on Thursday, which is expected to see it ease borrowing costs by 25 basis points from the present record level of 4%.
"A 25 bps rate cut is well telegraphed and so the key question on investors' minds will be the forward guidance on cuts for the rest of the year," said Jason Davis, global rates portfolio manager at J.P. Morgan Asset Management.
"A decision on further cuts this year will ultimately come down to whether services inflation starts to fall from its current level of 4.1% - if the ECB want to remain data dependent, this is probably the message they should send."
On the data front, a survey showed euro zone business activity expanded at its quickest rate in a year in May, as growth in the bloc's dominant services industry outpaced a contraction in manufacturing.
In the foreword to the Slovak central bank's financial stability report published on Wednesday, policymaker Peter Kazimir said the ECB is nearing its first interest rate cut with inflation on a good path.
Also aiding risk appetite, data showed hiring by U.S. private employers slid to a four-month low in May, adding to signs the job market in the world's biggest economy is cooling.
Among other stocks, Inditex (BME:ITX) jumped 3.7% after the Zara owner reported a pick-up in recent sales from its spring/summer collections.
B&M shed 7.3% after analysts highlighted the absence of news on current trading or precise guidance for the year ahead after the British discount chain reported a 9.7% rise in 2023/24 earnings, in line with expectations.
Elekta slumped 18% after the Swedish radiation therapy equipment maker posted a bigger-than-expected drop in fourth-quarter profit.