By Julien Ponthus
LONDON (Reuters) - European shares traded higher on Wednesday morning and were set for a second day of gains as sentiment towards the Sino-US trade dispute lifted after U.S. President Donald Trump sounded upbeat about a deal in a Reuters interview.
The Euro zone STOXXE (STOXXE) index was up 1 percent at 0920 GMT with most bourses across the continent in the black.
In Britain, the pound rose 0.5 percent and the FTSE (FTSE) gained 0.7 percent as expectations grew that Prime Minister Theresa May would survive a leadership challenge - a result that would reassert her authority and potentially diminish the chance of a chaotic Brexit.
Nomura analyst Jordan Rochester said he expected a May victory that would probably benefit sterling.
Amid the general upbeat mood, trading updates from retailers weighed on the overall sector which was the only one trading in negative territory, down 0.2 percent.
"It looks like another shocker of a day for UK retail as Inditex , Superdry and Dixons Carphone shares have slumped sharply in opening trade", wrote Michael Hewson, chief market analyst at CMC Markets.
Shares of Zara owner Inditex (MC:ITX) fell 4.5 percent as sales and profit growth came below market expectations.
A profit warning for British fashion retailer Superdry (L:SDRY) saw its shares lose close to 30 percent of their market value.
Also in Britain, Dixons Carphone (L:DC), the electricals and mobile phone retailer, lost close to 10 percent after reporting a statutory first-half pretax loss of 440 million pounds after booking 490 million pounds of exceptional charges, mainly related to goodwill.
It wasn't all gloom for retailers however with Belgium's Colruyt (BR:COLR) jumping close to 10 percent after better than expected results.
Another big winner was Pernod Ricard (PA:PERP) which rose close to 4 percent after it emerged that activist hedge fund Elliott Management took a stake in the French drinks company.