By Sruthi Shankar and Amy Caren Daniel
(Reuters) - Signs of a more accommodative U.S. Federal Reserve helped European stock markets rise for a third day on Wednesday, with technology stocks leading the way higher.
Europe's main STOXX 600 index rose 0.4% by 0829 GMT, shaking off a muted start and joining a rally in Asia and on Wall Street after U.S. central bank chief Jerome Powell promised to act "as appropriate" to combat rising trade war risks.
Allied to hints from St Louis Fed chief James Bullard a day earlier, investors took that as a shift from the "patient" approach the Fed has taken in recent months, and a pointer for the European Central Bank's own policy update on Thursday, where low inflation is making the case for more stimulus.
"The markets are strongly pricing in two rate cuts this year and the Fed leaving it open is a positive," said Craig Erlam, senior market analyst at OANDA in London.
"Powell hasn't necessarily said that we're cutting rates. Markets were excited about the fact that he didn't push back on Bullard's comments and that is why we got the initial reaction."
The pan-European stock index posted its worst monthly loss in over three years in May as trade tensions between the United States and China showed little signs of easing, raising fears of a slide into recession.
Technology stocks, under pressure from trade and regulatory issues in recent weeks, rose 1.5%, the most among the major subsectors, helped by a 1.9% rise in German business software firm SAP.
U.S. peer Salesforce.com Inc gave a strong full-year forecast on Tuesday.
French aviation company Dassault Aviation's shares jumped 4% to the top of the STOXX 600 after Goldman Sachs upgraded the stock to "buy", citing capital flexibility and inexpensive valuation.
Germany's DAX, France's CAC 40 and Spain's IBEX rose between 0.35% and 0.5%.
Italy's main market underperformed after a report that the European Commission will launch disciplinary procedures against Italy with a letter stating that fiscal policy lacks prudence and could expose it to a loss of market confidence.
Milan's FTSE MIB was flat and its banking index dropped 0.9%.
"I don't see a fine being levied on them, but we could see the implications weighing on Italian stocks and government bonds," said Erlam.
Elsewhere, aluminium maker Norsk Hydro ASA's shares rose 3.5% as its quarterly revenue and earnings beat expectations although the company said a cyber attack in March would cost it between 300 million and 350 million crowns.
A rebound in Carnival Corp drove the travel and leisure index 1.2% higher after cruise stocks came under pressure on Tuesday from the Trump administration's new restrictions on travel to Cuba.
(Reporting by Sruthi Shankar and Amy Caren Daniel in Bengaluru; editing by Patrick Graham)
