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EZ March business activity returns to growth

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DeliveryHero surges on report of activist investor taking

stake

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Volvo Cars gain after posting record March sales

(Updated at 1558 GMT)

By Johann M Cherian, Ozan Ergenay and Sruthi Shankar

April 4 (Reuters) - European stocks edged higher on

Thursday, led by cyclical sectors such as miners and automakers,

as investors were encouraged by signs of recovery in the euro

zone economy as well as inflation getting under control.

The continent-wide STOXX 600 index closed up 0.2%,

led by a 1.7% gain in the basic resources sector as

copper prices hit their highest in more than 14 months.

Automakers and banks gained more than 1%

each.

Euro zone business activity expanded last month for the

first time since May 2023, but the recovery was uneven with a

stronger-than-expected upturn in the bloc's dominant services

industry offsetting a deeper downturn in manufacturing, a survey

showed

.

Another set showed euro zone producer prices eased by

1.0% in February on a month-over-month basis, falling more than

economists' estimate of a 0.7% drop. This follows a

cooler-than-expected March consumer inflation print.

"Recent inflation trends in Europe stand in stark contrast

to what is happening in the U.S.," as per strategists at BCA

Research. "This divergence in inflationary dynamics will force

the ECB to be more dovish than the Fed."

The European Central Bank (ECB) is increasingly

confident that inflation is heading back to its 2% target and

the case for easing borrowing costs from record highs is

strengthening, the accounts of the bank's March 6-7 meeting

showed

.

Traders are pricing in a 25 basis point rate cut by the

ECB in June, while recent strong U.S. data has tempered

expectations of several rate cuts by the Federal Reserve.

The STOXX 600 touched record highs earlier this week on

optimism that major central banks would start reducing interest

rates in early 2024.

Delivery Hero

rallied 14.5% to become the top gainer among

STOXX 600 components, after reports said activist investor

Sachem Head had built a 3.6% stake in the German food delivery

company, seeking a seat on the supervisory board and potentially

to oust CEO Niklas Oestberg.

Volvo Cars gained 6.7% after the Sweden-based

firm posted a 25% jump in March sales from a year earlier to

78,970 cars - an all-time high for global sales in a single

month.

Basilea Pharmaceutica surged 12.4% after the Swiss

firm received the U.S. health regulator's approval for its

antibiotic Zevtera that treats bacterial infections including

multidrug-resistant strains.