By Marc Jones
LONDON (Reuters) - European shares edged up on Wednesday, building on their best day in seven months as investors waited to see if German business and European bank data support expectations of an interest rate cut.
Top European shares on the FTSEurofirst 300 opened 0.4 percent higher at 1187.45 points, after Tuesday's gains of almost 2.5 percent pushed the index back towards last month's 4-1/2 year high.
London's FTSE 100, Paris's CAC-40 and Frankfurt's DAX were up 0.4-0.5 percent.
Equities have risen as weak data from the euro zone has boosted expectations that the European Central Bank will cut rates next week and consider more radical measures such as targeted lending aid for firms.
A quarterly survey on bank lending conditions from the ECB as well as Germany's closely watched confidence index from the Ifo institute, are likely to feed those expectations when they are both released at around 0800 GMT.
"An ECB rate cut is now a question of when and not if so today's reports are all going to be important in fine tuning the market's expectations," said Nomura economist Nick Matthews.
The increased chance of a rate cut has also helped push the euro to a two week low in recent sessions and reduced euro zone Italian and Spanish bond yields to their lowest levels in 2-1/2 years.
At 0730 GMT the euro was trading virtually unchanged on the day at $1.30. German government bonds, favoured by risk-shy investors edged back from their recent highs ahead of a sale of 30-year debt.
Italy's expected nomination of a new prime minister after months of uncertainty also helped support risk assets.
"It looks like we're getting more movement in Italy - they're expected to name a new prime minister. But the Ifo will be key as we're now looking for (an ECB) move in May," one trader said.
(Additional reporting by Marius Zaharia; editing by Anna Willard)