European shares edged higher on Tuesday as a sharp jump in online fashion retailer Zalando offset weakness in luxury stocks on bleak China data, while markets awaited U.S. Federal Reserve Chair Jerome Powell's testimony.
The pan-European STOXX 600 index (.STOXX) inched 0.2% higher, reversing its declines from the opening bell as Europe's biggest online fashion retailer Zalando (ZALG.DE) jumped 4.8%.
The company provided a cautious outlook for 2023, but said it would continue to focus on improving profitability this year, including by cutting several hundred jobs across many of its teams as announced last month.
Europe's retail sector index (.SXRP) led gains with a 0.8% rise, followed by defensive plays including healthcare (.SXDP), utilities (.SX6P) and real estate (.SX86P).
Powell's testimony before Congress, set to begin at 1500 GMT (10 am EST), is keenly awaited for insights into the Fed's next move on interest rates.
The ECB's chief economist Philip Lane said on Monday that the central bank is likely to increase rates further in the coming months to fight high inflation in the euro zone even if there are some signs that price pressures are easing.
Another report showed that Austrian central bank Chief Robert Holzmann, a known hawk, sees the need for 50-basis-point hikes at the ECB's next four meetings.
"That would imply the ECB is still hiking by 50bps in July, and if realised, would take the deposit rate all the way up to 4.5%, which is a much higher number than other ECB speakers have been floating," wrote Deutsche Bank strategist Jim Reid.
Trade data from China showed a fall in exports and imports for the January-February period and pointed to continued weakness in demand for the country's products. China-exposed luxury giant LVMH (LVMH.PA) fell 0.2%, leading falls among peers.
Germany's Henkel (HNKG_p.DE) slipped 1.5% after saying it expects slower industrial and consumer demand to curtail sales growth this year.
