By Purvi Agarwal and Tharuniyaa Lakshmi
July 28 (Reuters) - European shares rose for a third day on Tuesday, led by consumer-focused stocks after strong results from Unilever, which helped offset declines in heavyweight banks and technology shares.
The pan-European STOXX 600 index gained 0.3% to 646.75 points by 0845 GMT.
Investor sentiment towards consumer-facing stocks, both staples and discretionary, improved following robust results.
Unilever jumped 6%, set for its biggest one-day gain in two years,
after the consumer goods group beat second-quarter sales growth estimates, while Mercedes-Benz added 3% after the German automaker reported a 22% rise in quarterly operating profit.
Luxury stocks got a boost after LVMH reported a 3% rise in quarterly sales. Though its shares fell 1.1%, the broader European luxury index edged up 0.6%.
"The underlying fundamentals of economies are still pretty strong, broader earnings growth has actually been better than expected both in the US and in Europe," said Nicholas Brooks, head of economic and investment research at London-based ICG.
"Unless we see a big move upwards in central bank policy rates because of higher energy prices, it's still a constructive environment for equities."
On the flip side, technology stocks slipped 0.1%, extending losses after the sector dropped nearly 2% in the previous session after the Information reported China has started manufacturing domestically developed immersion deep-ultraviolet lithography machines, a technology long dominated by Dutch equipment maker ASML.
Shares in ASML were down 1.1% in early European trading, while another steep fall in Asian chip stocks dented sentiment.
This comes in a week packed with U.S. Big Tech earnings that are crucial to gauge whether the heavy spending on AI will translate into returns quickly enough to justify elevated valuations.
Brooks said that valuations in some areas had moved "too high" and there could be another leg lower in shares in these specific tech-related areas.
Among other movers, Barclays lost 4.2% despite reporting a 17% rise in first-half profit that beat analysts' expectations.
Italy's Saipem slid 7.6% after the oil and gas contractor lowered its expectations for 2026 core earnings to reflect costs linked to the Middle East crisis.
Energy stocks were the biggest percentage decliners, down 1.1%, as oil prices extended their slide on optimism around another U.S.-Iran deal after Washington paused its strikes over the weekend. [O/R]
The policy statement from Federal Reserve Chair Kevin Warsh will be in focus on Wednesday. The U.S. central bank is expected to hold rates steady at this meeting, but markets are pricing in one 25-basis-point hike and about a 70% chance of a second by the end of this year, per LSEG-compiled data.
(Reporting by Purvi Agarwal and Tharuniyaa Lakshmi in Bengaluru; Editing by Amanda Cooper, Sherry Jacob-Phillips and Mrigank Dhaniwala)
