By Shreyashi Sanyal and Devik Jain
(Reuters) -Europe's STOXX 600 index closed higher on Tuesday, boosted by gains in technology and commodity stocks after softer-than-expected U.S. inflation data bolstered hopes of less-aggressive Federal Reserve interest rate hikes in the coming months.
The continent-wide index rose 0.4%, logging its fourth-straight session of gains and erasing intraday losses after softer-than-expected U.S. producer prices data provided further evidence that inflation was starting to subside.
Last week's report showed consumer prices rising at a slower pace and the rate-sensitive technology index added 1.7%, as euro zone bond yields slipped in line with U.S. Treasury yields. [US/]
"Investors are sort of seeing the fog of inflation clearing slightly, particularly in the United States," said Danni Hewson, financial analyst at AJ Bell.
Eurozone inflation data for October is due on Thursday.
Meanwhile in the euro area, European Central Bank (ECB) policymaker Francois Villeroy de Galhau said the bank expects to raise interest rates above 2%, but beyond that level rate hikes may be in a more flexible and less rapid manner.
The STOXX 600 still hovered near 11-week highs, but is still down 11.3% for the year amid worries about a harsh recession in the euro zone.
Latest data showed a flash estimate for euro zone gross domestic product grew in line with expectations in the July-September period. Separately, German investor sentiment rose again in November on hopes that inflation rates will fall soon.
"The ECB is going to have to work harder to cool inflation," Hewson said.
"The expectation is that inflation will stay higher for longer in the eurozone and that energy prices are going to keep taking a bite out of consumer spend in the eurozone, which is a reason why European equities haven't been looking quite so perky."
Investors also awaited the UK budget on Nov. 17, with expectations of tax increases and spending cuts - aimed at closing a 50 billion-pound hole in Britain's finances.
Oil and gas firms and miners added more than 1% each.
Teleperformance jumped 10% after Citigroup upgraded the French office support provider' stock to "buy" from "neutral".
The company would meet with Colombian Labor Ministry representatives this week after the country opened a probe into its work practices there.
Weighing the most on the STOXX 600 index was a 7.9% slide in Vodafone shares after the company cut its full-year free cash flow forecast and said annual earnings would come in the bottom range of its target.
European telecoms dipped 1%.
Danish medical device maker Ambu tumbled 14.8% to the bottom on the STOXX 600 after a cautious 2022/23 outlook.
(Reporting by Shreyashi Sanyal and Devik Jain in Bengaluru; Editing by Savio D'Souza, Shinjini Ganguli and Alexander Smith)