By Sruthi Shankar and Shreyashi Sanyal

(Reuters) – European stocks were subdued on Wednesday, as concerns about new lockdown measures overshadowed a surprise return to economic growth for the euro zone in March.

After falling as much as 0.7% in earlier in the day, the pan-European STOXX 600 index ended flat.

Euro zone stocks also cut losses after IHS Markit’s flash composite PMI, seen as a good guide to economic health, bounced above the 50 mark, separating growth from contraction, to 52.5 this month compared with February’s 48.8.

While the data gave investors some relief, a third wave of coronavirus infections and renewed lockdown measures in Europe, as well as a slow vaccine roll-out are likely to weigh on the final reading of the survey and April’s numbers.

“We believe this is a pause, not the end of the equity rally yet,” said Michele Morganti, an equity strategist at Generali Insurance Asset Management.

“COVID management is a bumpy road. We nevertheless think that recovery will be quite strong in the second half of the year.”

Another piece of data showed a flash estimate of euro zone consumer morale improved to -10.8 this month from -14.8 in February.

“The sharp increase in euro zone consumer confidence in March came as a big surprise given tighter restrictions across the bloc and ongoing difficulties with the AstraZeneca vaccine,” said Melanie Debono, Europe economist at Capital Economics.

The European stocks benchmark has pulled away from a one-year peak hit last week after major economies like Germany and France imposed new lockdowns.

Meanwhile, the European Union is set to extend COVID-19 vaccine export curbs to Britain and other areas with much higher vaccination rates, and to cover instances of companies backloading contracted supplies, EU officials said.

Among individual stocks, Italian defence and aerospace group Leonardo fell -6.1% after it postponed the initial public offering of its U.S. electronics unit DRS

Commerzbank rose 1.6% even as Germany’s No. 2 lender said it expects a net loss for 2021.

Big gains for chipmakers helped limit market losses.

Shares in ASM International, ASML and Infineon Technologies, were up between 0.3% and 5.2% after U.S. firm Intel Corp announced a $20 billion plan to expand its advanced chip manufacturing capacity.

French supermarket retailer Carrefour rose 2.3% after saying it had agreed to buy Brazil’s third biggest food retailer Grupo BIG in a deal that values it at $1.3 billion.

(Reporting by Sruthi Shankar and Shreyashi Sanyal in Bengaluru; Editing by Arun Koyyur)