Europe midday: Shares shrug off EZ CPI data, look to US inflation

European shares held modest gains on Thursday despite eurozone inflation rising more than expected, as investors looked ahead to prices data from the US.

The pan-regional Stoxx 600 index was 0.15% higher in early deals with major bourses mixed. Germany's DAX outperformed with a 0.35% rise despite July retail sales data falling and missing estimates of a rise.

Consumer prices in the eurozone area increased more than expected in August, raising concerns that the European Central Bank may act once again to bring down stubbornly high inflation with another interest-rate rise.

Just two weeks ahead of the ECB's next policy meeting on 14 September, Eurostat announced that the consumer price index increased 5.3% on last August, in line with July's reading but ahead of the 5.1% level expected by economists.

Ahead of the results on Thursday, analysts at Danske Bank said that a higher-than-expected reading "could add support to the case of a final 25bp rate hike from the ECB in September".

In Germany, retail sales fell by 0.8% month-to-month in July, missing forecasts of a 0.3% increase, according to official data released on Thursday.

On an annual basis, sales fell 2.2%, from a 1.6% decline in June, and below the consensus estimate of a 1.0% decrease.

Lower sales of clothing, shoes and hardware drove the decline, offsetting a rebound in food and online sales.

Meanwhile in China, factory activity contracted in August for the fifth month in a row. The official manufacturing purchasing managers' index rose to 49.7 from 49.3 in July, remaining below the 50.0 mark that separates contraction from expansion. Economists were expecting a reading of 49.2.

Meanwhile, the non-manufacturing PMI declined to 51.0 in August from 51.5 in July, versus consensus expectations of 51.2.

In equity news, Swiss banking giant UBS gained after delivering a record bottom line in its second quarter after booking a $29bn accounting gain from its takeover of Credit Suisse, but underlying profits still failed to meeting analysts' forecasts.

Building materials supplier Grafton was up as it reported a 29% fall in half-year profits amid a challenging market, but still lifted its dividend and announced a new £50m share buyback.

Pernod Ricard shares fell after the owner of Mumm champagne and Absolut vodka reported upbeat full-year results but warned of a softer first quarter in the US and China.

Reporting by Frank Prenesti for Sharecast.com