Europe midday: Stoxx up on US-China talk hopes, German property shares

European equity markets were higher at lunchtime on Friday amid continued investor optimism for a potential resumption of US-China trade talks, while a surge in German property stocks buoyed sentiment.

China's foreign ministry confirmed that talks were continuing between trade teams on both sides, a day after China's Commerce Ministry stressed the need for a "calm" approach.

The pan-European Stoxx 600 index was up 0.85% at 379.95 as the German Dax led the way higher with an increase of 1.18%, though most indices were still on course to finish the month lower than they started it.

London's FTSE 100 was up 0.76% at 7,238.92 as the UK and the EU ramped up Brexit talks with new plans to meet twice a week in September, while the pound was down 0.1% against the US dollar and up 0.1% versus the euro.

There was a further boost for investors as Eurozone inflation was reported steady in August and well below the European Central Bank’s 2% target, while the unemployment rate for July was also stable, underpinning the case for stimulus from the ECB.

Flash data from Eurostat showed that headline inflation in the currency bloc was unchanged on the month at 1.0% in August, in line with expectations. It was depressed mostly by lower energy inflation.

Meanwhile, core inflation - which strips out food and energy - was also unchanged, at 0.9%, versus expectations for a reading of 1.0%.

Other figures from Eurostat showed that the unemployment rate in the bloc was unchanged at a decade-low of 7.5% in July, in line with the consensus estimate.

In corporate news, German property companies dominated the Stoxx risers on reports that a rent freeze in Berlin could be more lenient than previously planned, with the inflation rate serving as a benchmark for future hikes.

Deutsche Wohnen, Vonovia, LEG Immobilien and Grand City Properties were all up as the construction sector rose 0.45% on the news.

The Bild newspaper reported that Berlin's ruling coalition planned to go ahead with a rent freeze but still allow moderate rises after a meeting between local government parties.

There had been suggestions over the weekend that monthly rents for apartments built up to 2013 would be capped at €7.97 per square metre, irrespective of location in the city.

UK builders merchant Grafton climbed 7.5% after it posted a 5% jump in half-year pre-tax profits to £88.2m as revenue rose despite Brexit uncertainty in the UK, with strong trading in Ireland and the Netherlands driving growth.

Elsewhere, shares in both Micro Focus and Amigo Holdings recovered by around 6.5% following heavy losses on Thursday on the back of results.

(Writing and editing by Frank Prenesti and Michele Maatouk)