European shares inched higher in early trade yesterday as upbeat corporate earnings and M&A activity propped up markets, offsetting a lower close on Wall Street after the US central bank left rates unchanged.

The FTSEurofirst 300 Index was up 0.04 per cent at 1,463.16 by 0915 GMT, while London's FTSE 100 and Paris's CAC-40 had gained 0.1 per cent and Frankfurt's DAX was unchanged.

In the US a brief rally stalled on Tuesday after the Federal Reserve left benchmark rates unchanged, as expected, and investors focused instead on the central bank's dour view of the slowdown in the housing market.

European stock markets benefited from positive earnings, such as Spain's Inditex. Inditex shares rose three per cent after Europe's largest clothes retailer reported a 22-per cent rise in nine-month net profit to 634 million euros, beating analysts' forecasts on strong sales.

Europe's biggest coal-fired power station, Drax Group, said trading for the year remained in line with its expectations and it planned to re-blade its turbines and return 33.7 million pounds to shareholders. Its stock rose almost one per cent.

Shares in the world's fourth-largest reinsurer Hannover Re gained three per cent after the German group announced the sale of its US subsidiary Praetorian Financial Group (PFG) to Australia's QBE Insurance Group Ltd. for $800 million.