UPDATE 3-Dovish ECB, upbeat earnings support euro zone stocks

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* EQT jumps after H1 results

* Unilever slides after flagging commodity costs

* FTSE underperforms, down -0.4%

* ECB promises longer support
(Updates to close)

By Sruthi Shankar

July 22 (Reuters) - European stocks rose for a third session
on Thursday after the European Central Bank pledged to keep
interest rates at record lows for even longer, while strong
corporate earnings underpinned optimism about an economic
recovery.

Euro zone shares rose as much as 1.2% after the
central bank said it would not hike rates until it sees
inflation reach its 2% target "well ahead of the end of its
projection horizon and durably". The index closed up 0.8%.

But the rate-sensitive euro zone banking index fell
0.2%, with government bond yields on the decline.

The region-wide STOXX 600 rose 0.6%, recovering
fully from its worst selloff in 2021 earlier this week, leaving
it just 1% away from record highs.

"This news should be a short-term positive for European
stocks and the overall recovery trade, providing additional
support especially amidst rising nerves over the Delta
(coronavirus) variant," said Xian Chan, chief investment
officer, wealth management at HSBC.

ECB President Christine Lagarde warned a fresh wave of the
pandemic could pose a risk to the euro zone's economic recovery.

Travel and leisure stocks topped sectoral gains
again, rising 2.6%. The index had hit a five-month low on Monday
on fears over the growing spread of Delta variant.

In earnings-driven moves, private equity firm EQT
jumped 12.8% to the top of STOXX 600 after reporting upbeat
first-half earnings, while Swiss engineering company ABB
hit its highest since November 2007 after it doubled
its full-year sales outlook.

But Unilever warning that surging commodity costs would
squeeze its full-year operating margin sent its shares
to 3-1/2 month lows.

Along with a slide in mining majors BHP and Rio
Tinto, which tracked a 7.3% plunge in iron ore prices,
London's blue-chip index dropped 0.4%.

Of the quarter of the STOXX 600 companies that have reported
so far, 61% have topped analysts' profit expectations, according
to Refinitiv IBES data. Typically, 51% exceed earnings
forecasts.

The benchmark STOXX 600 hit all-time highs last week on
optimism about a strong recovery in economic growth and
earnings. However, markets have turned volatile recently on
concerns about higher inflation and a resurgence in virus cases.

Sweden's Nordic Entertainment surged 10.3% after
reporting a rise in subscribers and quarterly operating income,
while Italy's Monte dei Paschi jumped 3.7% after the
lender and its former top investor reached a preliminary accord
to settle their legal disputes.

Swiss drugmaker Roche slid 3.6% after flagging an
anticipated slowdown in demand for COVID-19 tests.

(Reporting by Sruthi Shankar and Susan Mathew in Bengaluru and
Marc Jones in London
Editing by Frances Kerry and Mark Potter)