Europe midday: Shares rally with Fed in view

European shares rallied on Wednesday as investors awaited the outcome of the Federal Reserve policy meeting and also assessed news of a potential tie-up between two of Japan’s best known auto makers Honda and Nissan.

The pan-regional Stoxx 600 index was up 0.18% at 514 points. Expectations from the Fed meeting are for a 25 basis point cut, but also an indication that policy makers will be more cautious with the pace of reductions over the next year.

In other economic news, UK inflation reached 2.6% in November, official data showed on Wednesday, the second consecutive monthly rise.

According to the Office for National Statistics, consumer price inflation rose in the 12 months to November to 2.6%, up from 2.3% in October. Largely in line with expectations, it was the highest print since March.

The Bank of England meets on Thursday with economists forecasting no change in rates.

"The UK’s CPI data demonstrates why policymakers are set to stay hesitant about easing borrowing costs rapidly. Wariness is creeping into the central bank playground given that inflation is back on the see-saw, continuing to rise, after dipping below target in September," said Hargreaves Lansdown analyst Susannah Streeter.

"Even though the UK economy is also on the slide, with a back-to-back contraction in October and November, policymakers aren’t likely to cut rates tomorrow."

Meanwhile in Japan, multiple media reports said the two auto giants were in exploratory talks to expand ties, including a potential merger. The two firms in March agreed to explore a strategic partnership for electric vehicles.

Shares in Renault, which owns around 23% of Nissan were up almost 7%.

Commerzbank gained after Italian bank UniCredit said it had raised its potential stake in the German lender to 28% by signing new derivatives contracts.

Reporting by Frank Prenesti for Sharecast.com