By Sruthi Shankar

(Reuters) -UK shares rose on Wednesday, as upbeat earnings from airline EasyJet and insurer Aviva helped outweigh worries about Britain’s gloomy economic outlook and further interest rate rises.

The blue-chip FTSE 100 edged up 0.1% and the midcap FTSE 250 index climbed 0.5%, bucking a cautious mood across European markets.

Airline stocks got a lift after EasyJet said it expected to beat market expectations for 2023 on strong bookings into summer.

“easyJet has shown how a post-pandemic recovery is done,” Hargreaves Lansdown equity analyst Sophie Lund-Yates wrote in a note.

“Its superior proposition means its planes are at the right airports, with the right routes, to capture demand as holidaymakers return to the skies in force.”

EasyJet jumped 10.4%, set for its best day in almost a year, while Ryanair added 3.7% and British Airway parent IAG rose 2.3% to hit its highest since January 2022.

UK’s main equity indexes kicked off 2023 on an upbeat note, with the FTSE 100 flirting with record levels as signs of moderation in inflation and expectations of smaller interest rate hikes from the Federal Reserve boosted global sentiment.

Data showed Britain’s manufacturers unexpectedly reduced their prices in December, in a welcome move for the Bank of England which is weighing how much higher it needs to take interest rates.

The Times newspaper reported Britain’s official economic forecaster has told the government that it overestimated the prospects for medium-term growth and that it intends to revise down its outlook.

Aviva climbed 2.5% after the insurer maintained its dividend guidance and capital returns outlook.

Ascential Plc jumped 23.6% to the top of the midcap index after the events and analytics firm forecast full-year EBITDA at the top of end of market expectations.

J D Wetherspoon slipped 1.5% after the pub operator said it was “cautiously optimistic” about this financial year.

(Reporting by Sruthi Shankar in Bengaluru; editing by Uttaresh.V and Rashmi Aich)