German stocks edged up slightly on Wednesday after Federal Reserve Chair Jerome Powell suggested the case for interest-rate cuts is becoming stronger due to slowing inflation.
The closely watched monthly U.S. inflation report is due on Thursday, with analysts expecting core consumer prices to hold steady in June.
The benchmark DAX was up 64 points, or 0.4 percent, at 18,300 after declining 1.3 percent in the previous session.
In corporate news, automaker Volkswagen declined 1.6 percent after a warning that it may close the Brussels site of its luxury brand Audi due to a sharp drop in demand for high-end electric cars.
Evotec jumped 4 percent as it announced a collaboration with Pfizer Inc. (PFE) to advance drug discovery efforts in France.