European shares got off to a mostly positive start in February, even as they waited on the Federal Reserve’s interest rate announcement on Wednesday evening and the monthly non-farm payrolls report that was due out two days later.

A larger-than-expected fall in eurozone inflation ahead of the European Central Bank’s also contributed to the positive tone in markets – but some analysts were wary.

“The second half of the week’s action-packed schedule has provided a reason for investors to take risk off the table, as they await the Fed decision, and then the other major data that will follow on Thursday and Friday,” said IG chief market analyst Chris Beauchamp.

“Caution is the watchword today, and could well be the case tomorrow and Friday too. A hawkish Fed and poor tech numbers on Friday would be a decent catalyst for a rout in stocks, while the bulls will be hoping for good news on which to pin a fresh rally.”

The pan-European Stoxx 600 index drifted lower by 0.03% to 453.09 and the French Cac-40 slipped 0.07% to 7,077.11.

Germany’s Dax however added 0.35% to 15,180.74, the FTSE Mib was up 0.39% at 26,703.87 and Spain’s Ibex 35 gained 0.71% to 9,098.10.

In the single currency zone a flash estimate showed consumer price inflation declined to 8.5% year-over-year from 9.2% in December, coming in below consensus expectations of 9%.

Energy inflation fell to 17.2% in January from 25.5% a month earlier, while inflation in food, alcohol and tobacco ticked up to 14.1% from 13.8%.

Meanwhile in the UK, activity in the UK’s manufacturing sector shrank in January, albeit less than expected, for the sixth month in a row, according to a survey.

The S&P Global/CIPS manufacturing purchasing managers’ index rose to 47.0 from a 31-month low of 45.2 in December, coming in above the flash estimate of 46.7 but below the 50.0 mark that separates contraction from expansion.

Commenting on the outlook for the Fed’s decision, Interactive Investor analyst, Victoria Scholar, said: “Inflation has been falling for a while now in the USA and many analysts believe this will be the last increase, to be followed by a lull before the Fed then moves to begin cutting rates later this year.

“A lot of money rides on this so-called ‘Fed Pivot’. Whether it happens depends on where inflation goes from here.

“Economists did not do a great job predicting the scale and duration of post-pandemic US inflation, but for what it is worth, most seem to expect it to continue to fall from here.”

In equity news, telecoms giant Vodafone fell after a weak performance in German, Spain and Italy hit group revenues.

ITV gained on a report that Hollywood producer Peter Chernin and French TV production group Banijay’s parent have expressed interest in UK broadcaster ITV’s Studios unit.

Swiss drugmaker Novartis fell 3% after predicting that core operating income would grow in a “mid single digit” percentage range in 2023.

French nursing care homes company Orpea, riddled with scandal after charges of malpractice at its homes, slumped 22% after the company said that in principle it had reached a financial restructuring deal with investors.