London - European shares edged higher on Tuesday, led by gains for French food group Danone after it posted forecast-beating sales, although broader market sentiment remained cautious.

The pan-European FTSEurofirst 300 index reversed early falls to trade up 0.2 percent at 1,160.99 points by 10:14 SA time.

Danone led gainers across the region, up 4.8 percent after the company beat sales forecasts and announced plans to cut costs, although it forecast profits would be hit in 2013 by the economic downturn in southern Europe.

That economic weakness has acted to cap investor sentiment during the current earnings season and adds to persistent concern around the political outlook ahead of forthcoming elections in Italy.

Berkeley Futures associate director Richard Griffiths said the Euro STOXX 50 and German DAX equity index could fall by between 3-4 percent over the coming month.

“I think any in-roads to the upside will be hard to come by. I think we're in for a period of consolidation, with the risk more to the downside,” he said. - Reuters