Europe midday: Shares hold gains on China optimism

European shares held gains on investor optimism over the reopening of China’s economy, despite a weak session on Wall Street overnight and mixed Asian markets.

The pan-European Stoxx 600 index was up 0.22% at 1205 GMT, with all major regional bourses higher. Britain’s FTSE 100 pared early rises to be up 0.08%, shrugging off a surprise fall in December retail sales.

Retail sales continued to fall in December, official data showed, as hard-pressed shoppers cut back on spending.

According to the Office for National Statistics, retail sales volumes were estimated to have fallen 1% last month, compounding a 0.5% slide in November, revised downwards from an initial estimate of -0.4%. Analysts had been expecting a 0.5% improvement in sales in December.

Year-on-year, sales fell 5.8%. They were also 1.7% below February 2020, before the pandemic.

However, British blue chip shares with exposure to China made gains on the back of a rally in Beijing with Prudential, Glencore and Rio Tinto all higher, pushing the main index higher.

Meanwhile, Japan's consumer inflation hit a fresh 41 year high, keeping the heat on policymakers to end the country’s ultra-easy monetary policy. Core consumer prices rose by an annual 4% in December, the fastest inflation rate since 1981.

The Band of Japan defied market expectations earlier this week and stood by its yield curve control policy.

In Germany, the annual producer inflation rate fell to 21.6% in December, a 13-month low as price pressures showed signs of easing.

Eyes will also be on European Central Bank President Christine Lagarde, who is due to speak again at the Davos talkfest after stressing on Thursday that the central bank will stay the course of rate hikes to tame inflation.

In other equity news, Sweden's Avanza Bank soared as it reported a large rise in fourth quarter earnings.

UK power generator SSE gained as it upped earnings guidance on the back of surging energy prices.

British wealth manager Close Brothers tanked by 12% as it warned of continued weak performance from its Winterflood unit and an expectation of further sizeable provisions against the Novitas loan book, "both of which are likely to drive material current year earnings forecast downgrades".

Reporting by Frank Prenesti for Sharecast.com