European shares edged higher on Thursday as US inflation data fuelled hopes that the Federal Reserve was on the brink of ending its post-pandemic tightening cycle, although a raft of mixed economic data limited further upside.

The pan-European STOXX 600 index edged up 0.1% by 0708 GMT.

In the previous session, the benchmark index logged its biggest percentage gain since early June after a faster-than-expected slowdown in US consumer inflation reinforced bets that the Fed could end its rate hikes after July.

European stock markets advance at open

Keeping a lid on risk sentiment was weak trade data from China, while on the other hand, Britain’s economy contracted less than expected in May. Industrial stocks, which are sensitive to China-related news, were the biggest drags in the index.

Britain’s largest homebuilder Barratt Developments fell 4% after the company flagged it would build far fewer homes this fiscal year, while shares of Swatch rose 6.4% after the watchmaker reported record growth in the first half of the year.