Consumer-oriented automobile and travel stocks were the day's best performers, while British stocks rose after finance minister Rishi Sunak extended emergency programmes to support the economy through the COVID-19 pandemic.

A strong outlook from Stellantis boosted the automobile sector.

The pan-European STOXX 600 index ended largely unchanged after opening stronger, with utility stocks leading losses in the euro zone.

Utilities are often considered as proxies for bonds, and are sold off when debt offers relatively higher yields.

European bond yields rose on Wednesday, while a market gauge of long-term euro zone inflation expectations rose to its highest level since May 2019. [GVD/EUR]

Healthcare and technology shares also suffered big losses as focus turned away from defensive stocks and towards sectors more likely to benefit from an economic recovery.

"Healthcare has performed well during difficult periods in the market. Now that conditions have improved, people are considering general recovery areas which are benefiting from a recovery economy," said Chris Bailey, European strategist at Raymond James.

Hopes of COVID-19 vaccines spurring a return to economic normality drove optimism about euro zone business activity to a three-year high in an IHS Markit survey.

British bank stocks rose after Sunak said the UK would review a tax surcharge on bank profits to make them more competitive against foreign rivals.

But Sunak also announced future tax hikes to offset the large hole left in public finances by current spending.

German stocks ended about 0.3% higher as investors anticipated a gradual easing of coronavirus curbs as a sluggish vaccination campaign accelerates. Falls in major technology stocks helped to drag them down from a record high hit earlier in the session, however.

Automobile supplier Continental jumped 5.4% after UBS upgraded its rating to "buy", citing "attractive" value creation from the company's plans to spin off its powertrain unit Vitesco.

Swiss logistics group Kuehne & Nagel International rose 7.1% to the top of the STOXX 600 as it notched up record full-year operating profit.

Shares in UK insurer Hiscox Ltd tumbled 11.8% to the bottom of the STOXX 600 as the firm swung to a huge loss for 2020 and continued to withhold a dividend.

(Reporting by Sruthi Shankar in Bengaluru; Editing by Subhranshu Sahu and Anil D'Silva)

By Sruthi Shankar and Ambar Warrick