European Shares See Cautious Gains Ahead Of US Inflation Data, Fed Decision

European stocks traded higher on Wednesday as investors awaited key U.S. inflation data as well as a Federal Reserve policy decision later in the day for additional clues on the outlook for interest rates.

The euro held steady while French 10-year bonds snapped four days of losses.

Euro zone government bond yields dropped after having risen to their highest levels in around seven months on Tuesday following Moody’s warning of a downgrade on French debt.

In economic releases, Germany’s consumer price inflation increased for the first time in five months in May, as initially estimated, according to final data from Destatis.

Consumer price inflation rose to 2.4 percent in May from April’s stable growth of 2.2 percent, which was the lowest rate in three years. That was in line with the flash data published earlier.

On the other hand, EU-harmonized inflation climbed to 2.8 percent from 2.4 percent, as estimated.

Elsewhere, the U.K. economy stagnated in April as growth in services output was offset by falls in both production and construction output, the Office for National Statistics said earlier today.

Gross domestic product remained flat on month, as expected, after expanding 0.4 percent in March. In the three months to April, real GDP advanced 0.7 percent from the preceding three months.

The pan European STOXX 600 was up half a percent at 519.61 after declining 0.9 percent on Tuesday.

The German DAX edged up 0.4 percent, France’s CAC 40 added 0.2 percent and the U.K.’s FTSE was up 0.6 percent.

Banks traded higher, with French lenders BNP Paribas and Credit Agricole climbing 1-2 percent.

Rentokil shares jumped nearly 12 percent in London after activist investor Trian Fund Management acquired a substantial stake in the pest-control company.

Legal & General tumbled 3.1 percent as its new chief executive set out plans to restructure the business into three core units.

Landore Resources surged 51 percent after successfully raising £3.683 million through a subscription of new shares.

Skanska AB, a Swedish construction company, rose half a percent.

The company said it has divested the multi-family rental project Horkær Have in Herlev, Denmark to NREP, for about 737 million Danish Kroner or about 1.1 billion Swedish kronor.

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