Defensive sectors lift European shares after two-day rally

European stocks inched higher on Wednesday after marking their strongest two-day gain in more than a year, with defensive stocks rising as investors weighed the effectiveness of existing vaccines against the Omicron coronavirus variant.

After jumping 3.8 per cent over the past two days, the region-wide STOXX 600 index nudged 0.1 per cent higher in early deals.

Germany's BioNTech , which makes COVID-19 vaccines with Pfizer, fell 6.3 per cent after a study showed that the Omicron variant can partially evade protection from two doses of their COVID-19 vaccine.

Sectors considered more stable during times of uncertainty such as healthcare and food & beverages were the top gainers.

L'Oreal rose 1.1 per cent after consumer giant Nestle said it would cut its stake in the French cosmetics brand by selling shares worth 8.9 billion euros ($10 billion) to about 20 per cent.

Shares in Nestle rose 1.6 per cent to trade just short of record highs.

Travel shares fell as tour operator TUI's UK-listed shares slumped 5.4 per cent after it posted an annual loss of over 2 billion euros ($2.26 billion).

German meal-kit company Hellofresh slid 8.3 per cent after an underwhelming outlook for 2022 earnings.

Chipmakers Infineon Technologies dropped 2.9 per cent and STMicroelectronics slipped 1.3 per cent after Morgan Stanley downgraded the stocks to "equal-weight".