By Sara Sjolin, MarketWatch

LONDON (MarketWatch) -- European stock markets ended a choppy session in positive territory on Tuesday as investors shrugged off escalating violence in Iraq and disappointing U.S. data on inflation.

The Stoxx Europe 600 index rose 0.3% to close at 346.42, after losing 0.5% in the prior session amid a sectarian conflict in Iraq.

Iraq was also in the spotlight on Tuesday, with U.S. President Barack Obama saying he will deploy up to 275 troops to Iraq to "provide support and security" for U.S. staff and the U.S. Embassy in Baghdad, as Sunni militants continue a campaign of insurgency headed for the country's capital.

The Wall Street Journal also reported that Iraq's Shiite-dominated government stepped up its defense of Baghdad, while at least 28 insurgents were killed in an attack on the city's police station.

"I think some of the volatility is geopolitically related, but again we seem to be looking to shrug off macro-concerns and the market looks in good shape to push higher," Atif Latif, director of trading at Guardian Stockbrokers, said in emailed comments.

Car makers posted some of the biggest gains in the pan-European index after data showed the European auto industry continued to recover in May for a ninth straight month, although car registrations grew at the slowest pace in six months. In Paris, Renault SA --whose group sales jumped 19% last month--put on 0.9%, while Peugeot SA advanced 0.3%.

And in Frankfurt, shares of Daimler AG gained 0.9% and Volkswagen AG climbed 0.4%.

On a more downbeat note, shares of A.P. Moeller-Maersk AS slumped 5.3% after the Danish shipping company said its Maersk Line along with French CMA CGM SA and Switzerland-based Mediterranean Shipping Co. had abandoned plans for an alliance.

The broader European markets briefly dipped into negative territory in the afternoon after U.S. inflation data showed consumer prices rose more than expected last month. Analysts noted that this might mean the Federal Reserve will have to raise rates sooner than expected and this weighed on U.S. markets early in the trading day. However, U.S. indexes erased losses later in the session.

German investor-confidence data was also in focus. The ZEW economic sentiment indicator dropped to 29.8 points in June from 33.1 points in May, marking a sixth straight month of declines. Consensus was for a 35 reading.

The assessment of the current economic situation in Germany was more optimistic, rising by 5.6 points to 67.7 points.

Germany's DAX 30 index closed 0.4% higher at 9,920.32, buoyed by the benchmark's car makers. Siemens AG (SIEGY) rose 0.3% after the industrial conglomerate just before the close on Monday said it had officially bid to buy the gas-turbine business of French rival Alstom SA . The bid from Siemens and partner Mitsubishi Heavy Industries Ltd. values Alstom at EUR14.2 billion ($19.25 billion), according to Dow Jones Newswires.

Alstom shares dropped 1.2% on Tuesday.

France's CAC 40 index added 0.6% to 4,536.07, while the U.K.'s FTSE 100 index advanced 0.2% to 6,766.77.

The investing mood in the U.K. was partly lifted by weaker-than-expected inflation data, which eased pressure on the Bank of England to hike interest rates. Inflation fell to 1.5% in May from 1.8% in April, missing consensus estimates of a 1.7%-1.8% print. The pound (GBPUSD) slipped after the data, trading at $1.6966, down from $1.6983 late Monday.

"It will go some way to abating the aggressive calls for a rate hike from the Bank of England this year," said Alex Edwards, head of the corporate desk at UKForex, in a note.

BOE Governor Mark Carney last Thursday said the first interest-rate hike could come sooner than markets currently expect, triggering several banks to change their expectations for a rate increase by the end of this year.

On Wednesday, the Monetary Policy Committee releases minutes from the June meeting, which will be closely scrutinized for other clues on monetary tightening.

Among notable stock movers in London, shares of Whitbread PLC added 2.2% after the hotel and restaurant operator reported a 6.9% rise in first-quarter comparable sales, boosted by strong customer demand at both its Premier Inn and Costa Coffee divisions

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