- It's a busy day for earnings in Europe, with Commerzbank, SocGen and BMW among the companies reporting.
- U.S. ISM non-manufacturing purchasing managers index showed a surprise rebound in July.
- Elsewhere, investors are monitoring U.S. House Speaker Nancy Pelosi's high-stakes visit to Taiwan
LONDON — European stocks closed higher on Wednesday after strong U.S. economic data tamed investor fears of a looming recession.
The pan-European Stoxx 600 closed 0.5% higher, paring earlier losses. Tech stocks added 3.2% to lead the gains as most sectors and major bourses entered positive territory.
It comes after markets in Europe pulled back slightly on Tuesday, tracking risk-off sentiment globally as investors assess whether last month's rally has further to run.
Commerzbank, SocGen, BMW, Banco BPM, Siemens Healthineers, Veolia and Wolters Kluwer were among the companies to report earnings before the bell on Wednesday.
Shares of Czech cybersecurity firm Avast soared 43% after the U.K.'s competition regulator provisionally cleared its $8.6 billion sale to U.S. peer NortonLifeLock.
At the bottom of the Stoxx 600, Novo Nordisk slumped more than 9.4% despite reporting strong first-half sales.
On the data front, euro zone retail sales dropped by more than expected in June, falling 1.2% month-on-month for a 3.7% year-on-year decline as prices continued to rise, denting consumer demand.
However, in the U.S., stocks climbed on Wednesday after the ISM non-manufacturing purchasing managers index showed a surprise rebound in July.
Overnight, shares in the Asia-Pacific closed mostly higher, with mainland China markets leading gains despite U.S. House Speaker Nancy Pelosi's high-stakes visit trip to Taiwan, which is being closely watched by Beijing.
Pelosi on Wednesday met with Taiwanese President Tsai Ing-wen in Taipei, where she committed to support increased economic collaboration with the region.
China's Foreign Ministry spokesperson Hua Chunying tweeted that Pelosi's visit was a "major political provocation," while a spokesperson for the People's Liberation Army's Eastern Theatre Command said it would conduct "a series of joint military operations around the Taiwan Island from the evening of August 2."
Those operations include long-range combat fire live shooting in the Taiwan Strait and conventional missile firepower test launching, the statement said.
— CNBC's Tanaya Macheel and Abigail Ng contributed to this report.