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Europe closes higher; insurance stocks gain; Ukraine fears ease

European shares closed higher Wednesday, helped along by a rally in the insurance sector, as investors remained focused on geopolitical tensions.

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Defensive stocks up

The pan-European Euro Stoxx 600 index provisionally posted a 0.56 percent gain, while across Europe, bourses showed improvements of an average of about 0.5 percent. Germany's Dax was the highest-climbing index, closing provisionally 1.56 percent higher. Defensive stocks from the utilities and insurance sector had lead the markets higher in the session.

Insurance firm Swiss Life also posted strong gains after beating analyst expectations with a rise in first-half net income. Meanwhile, German pharma company Merck pushed higher on Wednesday morning with analysts highlighting a "mixed" set or results with core profit climbing by 2.3 percent.

BoE rate hike?

Expectations of a rate rise in the U.K. this year have been damped by weaker expectations of growth in wages, making a rate hike as early as November less likely, according to the Bank of England's quarterly inflation report.

On Wednesday morning, the bank revised its forecast for wage growth on down to -0.25 percent for the year, after figures from the Office for National Statistics (ONS) revealed pay including bonuses for employees in the U.K. was 0.2 percent lower than a year earlier between April and June.

BoE Governor Mark Carney said increases in bank rate, when they come, are likely to be gradual and limited and MPC (monetary policy committee) expectations on a possible rate rise are "shared by markets."

Read MoreBoE tempers rate hike expectations on weak wages

Unemployment data for the country, released earlier in the session, saw the jobless rate fall to 6.4 percent in the three months through June.

In the euro zone, a final reading for German inflation came in as expected with a yearly figure of 0.8 percent. France's data showed a yearly rise of 0.5 percent, beating a previous estimate. Spain's final reading confirmed a yearly fall of 0.3 percent, which was the fastest drop seen in almost five years.

The metric is seen as a key gauge of the economic strength of the bloc by the European Central Bank which had announced a range of stimulus policies back in June in the hope of supporting a fragile recovery in the region. Meanwhile, June industrial output numbers for the euro zone showed a fall of 0.3 percent fro the month before.

Geopolitical tensions remain

In the U.S., markets also started their day higher with the Dow Jones Industrial Average, the broader S&P 500 and Nasdaq all up.

Investors will also focus on geopolitical tensions in Ukraine and Iraq. A Russian convoy of trucks carrying humanitarian aid left Moscow for Ukraine on Tuesday despite the international community warning that it shouldn't be used as a pretext for an invasion. Kiev, meanwhile, has said it would not allow the vehicles to cross on to its territory.

This comes as fighting between the Ukrainian government and pro-Russian rebels continues in the east of the country. Calming words from Polish Foreign Minister Radoslaw Sikorski gave investors some comfort on Wednesday along with reports that the convoy will travel under cooperation with the Red Cross. Russian blue-chip stocks were trading higher by 1.3 percent in morning trade.

Read MoreUkraine says may block Russian aid convoy

In Iraq, 130 military advisors for the U.S. have arrived in Irbil, which includes marines and special operations forces who assess the humanitarian situation in the north of the country. Secretary of Defense Chuck Hagel on Tuesday reiterated that the U.S. is not going back into Iraq with a "combat boots-on-the-ground operation."

Asian shares traded mixed on Wednesday as markets shrugged off an uninspiring handover from the U.S., a poor showing of the Japanese economy and key monthly indicators from China.

Read MoreJapan shows sharp contraction in second quarter

In other stocks news, Glencore Xstrata shares fell 2.5 percent after a production update by the mining company. Results were broadly in line with estimates, according to analysts, with traders positioning for the company's full earnings release next week.

Shares of the U.K.'s G4S edged higher by 5.27 percent as the security group announced a better-than-expected rise in first-half operating profit.

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