Europe midday: Stocks pare gains ahead of US inflation data; miners rally

European stocks had pared gains to trade just a touch higher by midday on Tuesday, with miners on the rise after China cut borrowing costs, as investors eyed US inflation data later in the day.

The pan-regional Stoxx 600 index and France’s CAC 40 were both up 0.1%, while Germany’s DAX was 0.2% firmer,

Data out earlier from Destatis showed that German inflation continued to slow in May, in line with expectations.

The consumer price index was 6.1% year-on-year in May, compared to April's rise of 7.2%.

The harmonised index of consumer prices rose 6.3% year-on-year, against the 7.6% rise seen in April. All European Union countries use the same methodology to calculate HICP.

Both the CPI and HICP measures of inflation were in line with earlier estimates from Destatis, and consensus.

Ruth Brand, Destatis president, said: "The rate of inflation has continued to slow, but remains at a high level nevertheless.

"The year-on-year increase in energy prices was much smaller in May, and food prices continued to be the biggest driver of inflation."

Energy prices rose 2.6% year-on-year in May, compared to April’s 6.8% jump. Food price inflation also eased, falling to 14.9% from 17.2% in April, but remains at historically high levels.

Investors were also digesting the latest ZEW survey, which showed that German business sentiment improved in June.

The headline ZEW investor expectations index rose to -8.5 from -10.7 in May, coming in above consensus expectations for a reading of -13.1. Meanwhile, the current conditions index slid to -56.5 in June from -34.8 the month before, missing expectations of -40.0.

ZEW President Achim Wambach said: "The ZEW Indicator of economic sentiment shows a slight improvement, but it remains in negative territory. This means that experts do not anticipate an improvement in the economic situation during the second half of the year.

"Particularly, sectors focused on exports are likely to perform poorly due to a weak global economy. However, the current recession is generally not considered particularly alarming."

Looking ahead to the rest of the day, all eyes will be on the US consumer price index for May at 1330 BST as the Federal Reserve’s two-day policy meeting kicks off.

In equity markets, the Stoxx 600 basic resources index was up 2.2% at 572.51 after China cut borrowing costs.

Elsewhere, UK insurer Admiral tanked after Citi downgraded its stance on the shares to ‘sell’, saying that a ‘deep dive’ into industry loss ratio trends had suggested that consensus estimates for the group are currently an outlier.