European markets nudge higher as U.S. inflation heats up; Philips down 15%

The pan-European Stoxx 600 was 0.5% higher by mid-afternoon, with basic resources climbing 3.3% to lead gains while health care stocks dropped 0.7%.

French electrical parts supplier Rexel saw its shares climb 8.4% to lead the Stoxx 600 after hiking its full-year 2021 outlook.

At the bottom of the European blue chip index, Dutch health tech giant Philips plunged more than 15% after issuing a fourth-quarter profit warning following hits from parts shortages, increased provisions for device recalls and higher supply costs.

Global markets had one eye on the latest reading of U.S. inflation on Wednesday to assess the economic picture in the world's biggest economy and the Fed's next move.

The consumer price index rose 7% in December from 12 months ago, meaning annual inflation hit its fastest incline for nearly 40 years.

Fed Chairman Jerome Powell said on Tuesday that the economy is both healthy enough and in need of tighter monetary policy, which likely will entail rate hikes, tapering of asset purchases and a smaller balance sheet. He did not, however, announce an accelerated change in policy from what the central bank had already signaled.

U.S. stock futures advanced in premarket trading on Wednesday, after a rally on Wall Street in the previous session as investors bought the dip following a five-day sell-off in the S&P 500.

Chinese markets also rose on Wednesday, tracking gains across Asia-Pacific. Data released in Asia on Wednesday included China's consumer and producer price index for December. The index was up 1.5% in December compared to a year ago, according to Reuters — a drop from the 2.3% increase in November and lower than the 1.8% rise expected in a Reuters poll. 

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— CNBC's Weizhen Tan and Yun Li contributed to this report.