April 10 (Reuters) - European shares staged a recovery after a knee-jerk reaction to a high U.S. inflation reading on Wednesday, with investors turning their focus to the European Central Bank's monetary policy decision on Thursday.
The pan-continent STOXX 600 (.STOXX), opens new tab closed 0.1% higher, after hitting a near one-month low intraday, with banks (.SX7P), opens new tab and the energy sector (.SXEP), opens new tab leading the charge, up 0.9% and 0.6%, respectively.
Germany (.GDAXI), opens new tab and Italy's (.FTMIB), opens new tab benchmark indexes turned positive after dropping into the negative territory, while those of France (.FCHI), opens new tab and Spain (.IBEX), opens new tab came off their day's lows.
Financial markets are now betting that the most influential central bank, the Federal Reserve, will delay cutting interest rates until September after data showed a higher-than-expected rise in U.S. consumer prices in March.
"It's just the initial shock and then kind of optimism coming back in again, wondering, does it make a huge difference?," said Morningstar's European market strategist Michael Field, who thought the data likely cemented bets of the ECB cutting rates before the Fed.
Focus now shifts to the ECB's policy meeting on Thursday, expected to hold rates steady. With both hawks and doves coalescing around a June rate cut, the meeting will likely centre around the bank's growing confidence that conditions will be in place to lower rates in June.
"For the ECB, it's not just weighing up whether inflation's resurging, they're also trying to balance not shifting us into recession and not leaving rates too high for too long," Field added.
Technology stocks (.SX8P), opens new tab also rebounded from the red, after the sector led gains in early trade following upbeat quarterly revenue from Taiwan chipmaker TSMC (2330.TW), opens new tab.
However, rate-sensitive real estate sector (.SX86P), opens new tab shed 1.5% after the data, with Swedish stocks Balder (BALDb.ST), opens new tab and Sagax (SAGAa.ST), opens new tab falling around 4% each.
Utilities (.SX6P), opens new tab also lost 1.3%. Italy's Italgas (IG.MI), opens new tab lost 2.8% on a report of the company's preliminary 4-5 billion euros offer for main domestic rival 2i Rete Gas, while Enel (ENEI.MI), opens new tab lost 2.2% after an explosion at a hydroelectric power plant in northern Italy on Tuesday.
Barry Callebaut (BARN.S), opens new tab jumped 11% after the chocolate maker reported upbeat half-yearly revenue, easing fears that jumping cocoa prices and other inflationary pressures might hit demand.
Tesco (TSCO.L), opens new tab climbed 3.3% after Britain's biggest retailer forecast a further rise in profit.
Europe's largest copper producer Aurubis (NAFG.DE), opens new tab advanced 4.9% after Metzler Capital Markets upgraded its rating to "buy" from "hold".
French payments services firm Edenred (EDEN.PA), opens new tab lost 4.2% after Jefferies initiated coverage with "underperform".
Reporting by Johann M Cherian, Ozan Ergenay and Ankika Biswas; Editing by Eileen Soreng, Shinjini Ganguli, Elaine Hardcastle
