Europe midday: Shares rally ahead of German CPI; Direct Line takes off

European shares rallied on Thursday as investors eyed inflation data from German and Spain for any indication on the future path of eurozone interest rates.

The pan-European Stoxx 600 index was up 0.36% to 506.78 points. France’s CAC 40 gained 0.43% despite the ongoing row over Prime Minister Michel Barnier’s attempts to pass his tough Budget.

Far-right anti-immigrant leader Marine Le Pen has threatened to collapse Barnier's government in a no-confidence vote over his budget measures, which include cuts to spending and lift taxes. French equities and bonds come under pressure on Wednesday amid the turmoil.

The premium on government borrowing hit its highest level since the eurozone's debt crisis of 2012. Barnier plans €60bn in savings and aims to cut the deficit to 5% of economic output next year from more than 6% this year. France's Senate will start examining the Budget legislation on Monday.

In other economic news, economic confidence in the eurozone edged higher in November, according to a survey released on Thursday by the European Commission, but remained below its long-term average.

The Economic Sentiment Indicator for the single-currency region rose 0.1 points to 95.8, surprising economists who had predicted a fall to 95.1.

In equity news, shares in UK insurer Direct Line rocketed by 42% after news overnight that rival Aviva had tabled a £3.3bn offer – which was rejected. Aviva stock fell on the news.

Chip stocks gained after a report that the incoming US administration's China chip curbs could be less severe than expected. Shares in sector heavyweights ASM International, ASML and BE Semiconductor all made gains.

Remy Cointreau reversed morning losses as the drinks maker reported a 17.6% fall in half-year operating profit, but its chief executive later told reporters the company had reached bottom in the US.

International Distribution Services shares were higher after a BBC report stated Czech billionaire Daniel Kratinsky's EP Group was close to finalising a deal to buy the parent company of Royal Mail after making extra concessions to get his offer accepted.

Reporting by Frank Prenesti for Sharecast.com