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* European autos sector touches highest level since June
2018
* Zalando at 3-week peak, retail sector hits record high
* Volkswagen says cost cuts to boost margin, shares jump
* European stocks volatility gauge at February 2020 lows
(Adds analyst comments, updates prices throughout)
By Shreyashi Sanyal
March 16 (Reuters) - European stocks rose on Tuesday as an
upbeat forecast from German carmaker Volkswagen prompted a rally
in the automobiles sector, while investors awaited the U.S.
Federal Reserve's views on a recent pickup in inflation.
The pan-European STOXX 600 index rose 0.9%, inching
closer to a record peak set last year, while the regional autos
sector jumped 2.1% to its highest level since June 2018.
Leading gains among autos was Volkswagen AG
which jumped 6.7% after it said it was confident that cost cuts
will help improve profit margins in the coming years.
"There is something to do with more interest as global
investors are becoming more attracted to areas outside of
technology which would include sectors like autos, mining and
industrials," said Chris Bailey, European strategist at Raymond
James.
"Particularly for autos it is a combination of higher demand
as economies recover and also these are companies with proper
international businesses."
Zalando rose 5.0% after it forecast 2021 revenue
growth above market expectations following a strong start to the
year. Its shares touched a three-week high and lifted the wider
retail index.
A gauge of volatility in European stock markets
slipped to its lowest level in over one year.
Investors are focused on the Fed's two-day policy meeting,
which will end on Wednesday amid concerns that a potential spike
in inflation as economies recover could prompt the central bank
to tighten monetary policy sooner than expected.
Official data showed French final inflation rose largely in
line with estimates in February. Meanwhile, the ZEW economic
research institute said investor sentiment in Germany increased
by more than expected in March, buoying the outlook for a
broad-based recovery in Europe's largest economy.
While optimism about an economic recovery has pushed markets
to near-record highs, concerns remain about the pace of COVID-19
vaccination in Europe, with Sweden becoming the latest country
to pause AstraZeneca's vaccine after several countries
reported possible serious side-effects.
Deutsche Bank slashed 2021 economic growth forecasts for the
euro area by a percentage point, citing spillover of the ongoing
pandemic-linked activity curbs, but raised predictions for
Britain, the United States and India.
French telecoms operator Iliad SA jumped almost
4.5% after saying it aimed to turn a core profit for its Italian
business in the second half of this year.
German biotech firm Morphosys slumped
10.6????????% to the bottom of STOXX 600 after forecasting a
fall in 2021 revenue.
(Reporting by Sruthi Shankar and Devik Jain in Bengaluru
Editing by Arun Koyyur and Matthew Lewis)
