German share price index DAX graph is pictured at the stock exchange in Frankfurt
The German share price index DAX graph is pictured following the IPO of Porsche at the stock exchange in Frankfurt, Germany, October 18, 2022. Reuters

European shares reversed early gains on Wednesday, as investors fretted about runaway inflation and aggressive monetary policy tightening, even as upbeat corporate earnings soothed some fears about a recession.

The region-wide STOXX 600 index was down 0.5%, snapping a rally this week that was mainly driven by hopes of a better-than-expected earnings season and the UK's fiscal policy reversal.

Data showed UK inflation hit 10.1% in September, matching the 40-year high touched in July, and putting more pressure on the Bank of England to step up interest rate hikes to rein in surging prices.

Inflation in the eurozone reached 10% last month, as the region grapples with soaring energy prices that have raised the risks of a recession this winter.

Most sectors on the STOXX 600 were in negative territory, with real estate and mining stocks leading the losses, while the technology sector was boosted by strong results from ASML Holding NV.

Chip equipment maker ASML reported better-than-expected third-quarter sales and profit and said it did not expect a large impact from U.S. sanctions on China. Its shares were up 5.3% and among the top gainers on the index.

Just Eat Takeaway.com rose 0.4% after Europe's largest meal delivery company said it made an underlying quarterly profit earlier than expected.

"Earnings numbers (are) all good but global inflation, macro events are going to take precedent," said Michael Baker, head of online services at Oval Money.

"The only way to combat inflation is to aggressively hike rates and so what the market is expecting now is a lot more aggression from central banks."

Among other single stocks, Handelsbanken rose 4.6% after the Swedish bank reported record operating earnings, helped by a jump in interest income.

Nestle raised its full-year sales outlook, but the company's CEO raised concerns about the "challenging economic environment" affecting consumers' purchasing power. Shares of the world's largest packaged food company were down 0.1%.

Sartorius dropped 13.9% after the German lab equipment maker said it expected 2022 revenue to reach the lower half of its outlook.