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* UBS shares hit multi-year highs

* Euro zone flash inflation data awaited

* Pernod Ricard falls after flagging slowdown in Q1

* STOXX 600 up 0.3%

Aug 31 (Reuters) - European shares rose on Thursday as financials received a lift from Swiss lender UBS's decision to absorb Credit Suisse's domestic bank, while investors braced for a barrage of key economic data due later in the day.

The pan-European STOXX 600 advanced 0.3% to 460.6 points, shrugging off the initial uncertainty.

Recent gains have helped the benchmark stave off its worst monthly performance so far this year, but is still set to log a decline of over 2%.

Shares of UBS Group jumped 5.4%, hitting their highest level since October 2008.

The bank said it planned to cut 3,000 jobs in Switzerland in the next couple of years, as it offered the first glimpse of how it plans to achieve more than $10 billion in cost savings.

The broader financial services index added 1.4%, hitting its highest level in a month.

Rate-sensitive real estate stocks gained 1.6%, while bond yields across Europe eased.

Investors had a raft of economic data to digest this morning. German retail sales fell by 0.8% in July compared to the previous month and preliminary EU-harmonised official data showed French inflation accelerated more than expected in August.

"It's definitely showing the picture that inflation is still a concern," said Daniela Hathorn, senior market analyst at Capital.com.

"The European Central Bank (ECB), one of the banks that has been most hawkish in the last two or three months, won't stop until they feel that inflation is under control."

A separate reading showed German unemployment rose more than expected in August.

All eyes would now be on inflation data in the euro zone and the U.S., with policy meetings from the Federal Reserve and ECB looming next month.

Meanwhile, ECB board member Isabel Schnabel said that euro zone growth was weaker than predicted just a few months ago but that did not automatically void the need for more rate hikes.

Pernod Ricard slipped 3.8% after the owner of Mumm champagne and Absolut vodka said challenging macroeconomic conditions would drive down sales in China in the first quarter, with a high year-ago comparison basis expected to ease from the second quarter.

Glencore dropped 4.5% after a media report said investors sought damages over 'untrue statements'. Shares of the global miner were also trading ex-dividend.

Ambu slid 6.4% after the Danish medical device maker cut its full-year guidance. (Reporting by Shashwat Chauhan in Bengaluru; Editing by Sherry Jacob-Phillips and Janane Venkatraman)