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Renault jumps on Honda-Nissan alliance report

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Fed seen cutting rates, outlook in focus

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Commerzbank climbs as Unicredit ups stake

(Updates with London morning prices)

By Sruthi Shankar

Dec 18 (Reuters) - European stocks edged higher on

Wednesday, lifted by Renault on talks of a potential merger

between Japan's Honda ( HMC ) and Nissan ( NSANF ), though gains

were capped on caution ahead of the Federal Reserve's policy

decision and outlook.

The pan-European STOXX 600 was up 0.1% by 0925 GMT,

while stocks in Asia were also in a wait-and-watch mode.

French carmaker Renault rose 6%, leading gains on

the STOXX 600, after a report of a possible tie-up between

Japan's top carmakers. Renault owns a 36% stake in Nissan ( NSANF ).

The Fed is widely expected to cut rates by 25 basis points

(bps) later on Wednesday, in what some observers are calling a

"hawkish cut", set to be delivered alongside policymakers'

updated interest rate outlooks and economic forecasts.

U.S. Treasury yields have, meanwhile, climbed to multi-week

highs, weighing on global stocks recently, as investors scaled

back bets on the pace of Fed rate cuts next year.

"Recent macro data suggest (U.S.) economy activity remains

resilient, that the softening of the labor market is contained

and that progress on disinflation has stalled over the last few

months," Unicredit analysts said in a note.

"It likely means that a slower (the new buzzword is

"gradual") pace of rate cuts lies ahead, which we anticipate

will mean one 25bp cut per quarter in 1H25 while data dependence

is maintained."

The UK's FTSE 100 rose 0.4% on Wednesday as sterling

came under pressure ahead of the Bank of England's (BoE) rate

decision on Thursday, where it is expected to keep rates on

hold.

British inflation hit an eight-month high in November, but

the rise in services prices - watched closely by the BoE as an

underlying measure of inflationary pressures - held steady,

offering the central bank a little bit of relief.

Among other stocks, Commerzbank jumped 3.3% after

Italian bank UniCredit said it had raised its

potential stake in the German lender to 28% by signing new

derivatives contracts.

British fintech firm Wise advanced 4.2%, touching

a more than three-year high.

Grenergy surged 19.2% after the Spanish renewables

company agreed to sell an asset portfolio in Chile to

ContourGlobal, a KKR company, for an enterprise value of

$962 million.