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* Inditex tops STOXX 600 on upbeat trading update

* Euro zone business activity expands at fastest rate in a
year

* STOXX 600 up 0.5%, led by retail and technology stocks

June 5 (Reuters) – European shares gained on Wednesday,
mirroring global sentiment as a soft U.S. labour market data
firmed bets of a rate cut from the Federal Reserve, ahead of the
European Central Bank’s key rate verdict later this week.

The pan-European STOXX 600 was up 0.5% as of 0840
GMT, rebounding from the previous session’s losses.

Wall Street ended higher on Tuesday and Asian equities
broadly rose on Wednesday after data showed U.S. job openings
fell in April, signalling an easing labour market and firming
bets of a Fed rate cut in September.

“If you’re kind of sanguine about the labour market and you
see that earnings revisions are broadly positive in the U.S.,
that gives you a positive backdrop for equities,” said Richard
Flax, chief investment officer at Moneyfarm.

Most sectoral indexes traded higher, with retail
advancing 1.4% to hit an over two-year high as Zara-owner
Inditex jumped 4.7% on better-than-expected current
trading numbers in its first-quarter results.

Spain’s benchmark IBEX index was up 0.6%.

Adding to the sector’s gains, WH Smith advanced
3.7% after the British retailer said it was well positioned for
the peak summer, betting on strong travel demand.

Investors are now focused on the ECB’s key interest rate
decision on Thursday, where it is expected to ease borrowing
costs by 25 basis points from the present record levels of 4%.

“Even if the ECB does cut rates tomorrow, one of the
questions that will come up, particularly given the recent
inflation data is to what extent the ECB can cut further from
here and on what time frame,” Moneyfarm’s Flax added.

In the foreword to the Slovak central bank’s financial
stability report published on Wednesday, policymaker Peter
Kazimir said the ECB is nearing its first interest rate cut with
inflation on a good path.

Meanwhile, a survey showed euro zone business activity
expanded at its quickest rate in a year in May, as growth in the
bloc’s dominant services industry outpaced contraction in
manufacturing.

Among other stocks, ASML rose 3.3% after
Jefferies said the Dutch semiconductor equipment maker’s CFO
provided positive feedback on talks with TSMC during a
small group call.

The technology sector climbed 1.6%, while
European lenders were market laggards, down 0.2%.
(Reporting by Shristi Achar A in Bengaluru; Editing by Varun H
K and Eileen Soreng)