European shares were broadly higher on Wednesday as bond yields took a breather ahead of crucial inflation data in the United States, with British bourses outperforming following a soft local inflation reading.

The pan-European STOXX 600 was up 0.3% as of 0913 GMT, on track to snap a three-day losing streak.

UK’s more domestically focussed midcap index jumped 1.4% after data showed British inflation unexpectedly slowed to an annual rate of 2.5% in December from 2.6% in November, with the core measures of inflation falling more sharply.

The blue-chip FTSE 100 was last up 0.7%. Yields on long-dated European government bonds eased a touch.

The yield on the region’s benchmark 10-year bond stood at 2.603%, on track to snap a 10-day rising streak. Rate-sensitive real estate stocks were up 1.2%, while utilities, often traded as a bond proxy, added 0.4%.

In France , consumer prices rose 1.8% year-on-year in December, while Spain’s EU-harmonised 12-month inflation rate rose to 2.8%.

A separate reading showed the German economy contracted for the second consecutive year in 2024.

European shares extend slide as markets ponder Fed rate outlook

Later in the day, all eyes would be on the December US consumer prices reading, a crucial metric for gauging the Federal Reserve’s rate path as investors remain wary of inflationary risks.

“With a little hint of more inflation in the CPI numbers today, it could be that the markets will reach the 5% (yield) on the 10-year (bond) today,” said Jochen Stanzl, chief market analyst at CMC Markets.

“Markets are trying to adapt to a new scheme of having rates on a higher level for a longer time.”

European equities came under pressure earlier this month as bond yields surged tracking US Treasuries. Investors around the world would also look out for earnings from top US lenders including JPMorgan, Wells Fargo, Goldman Sachs and Citigroup that are due later in the day.

France’s Ubisoft rose 3% after Bloomberg reported Tencent Holdings and the video game maker’s founding Guillemot family were considering creating a new venture that would include certain Ubisoft assets.

France’s Bureau Veritas and Swiss testing and inspection company SGS said they were in merger talks. Bureau Veritas was up 3.9%, while SGS dropped 4.2%.

JCDecaux gained 3.2% after J.P.Morgan upgraded its rating on the French advertising group to “neutral” from “underweight”.