Dec 18 (Reuters) – European share indices closed up on Wednesday, boosted by technology stocks and French automaker Renault, though gains were capped on caution ahead of the Federal Reserve’s policy decision and outlook.

The pan-European STOXX 600 (.STOXX), closed 0.2% up, snapping a four-day losing streak, with technology (.SX8P), outperforming, up 1.1%.

French carmaker Renault (RENA.PA), rose 5.2%, leading gains on the STOXX 600, after sources told Reuters that Honda (7267.T), and Nissan (7201.T), were in talks to deepen ties, including a possible merger. Renault is Nissan’s largest shareholder and said it was open in principle to a deal.

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.

“The latest economic data from the US paint a mixed picture. Strong retail sales figures are offset by a surprising decline in industrial production,” said Jochen Stanzl, chief market analyst at CMC Markets.

“Nevertheless, the Fed still has the option of cutting interest rates tonight, garnished with a cautious outlook to a year 2025 in which there could be very few or no further rate cuts.”

In Europe, euro zone inflation came in at 2.2% in November, a final reading showed, a slight downgrade from a previous estimate of 2.3%.

The UK’s FTSE 100 (.FTSE), closed flat 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 (CBKG.DE), added 1.4% after Italian bank UniCredit (CRDI.MI), said it had raised its potential stake in the German lender to 28% by signing new derivatives contracts. UniCredit closed up 1.3%.

Sweden’s SBB (SBBb.ST), surged 22.1% after the real estate group completed a bond exchange offer.
Grenergy (GREG.MC), soared close to 20% after the Spanish renewables company agreed to sell an asset portfolio in Chile to ContourGlobal, a KKR company (KKR.N), opens new tab, for an enterprise value of $962 million.

Reporting by Sruthi Shankar and Shashwat Chauhan in Bengaluru; Editing by Sonia Cheema and Emelia Sithole-Matarise