European stocks are poised for a higher open on Wednesday as investors track global market movements and fresh economic data. Market indicators suggest a positive start, with the U.K.’s FTSE 100 expected to rise 0.2%, Germany’s DAX up 0.3%, France’s CAC 40 climbing 0.4%, and Italy’s FTSE MIB gaining 0.3%. The upbeat tone reflects cautious optimism among traders navigating a mix of inflation data and central bank signals.
Investor sentiment received a boost after new figures from the Office for National Statistics showed that U.K. inflation eased to 3% in January, down from 3.4% in December. The data matched economists’ expectations and marked the lowest inflation reading in nearly a year. For households and businesses grappling with prolonged price pressures, the slowdown offers a glimmer of relief.
Market analysts say the cooling inflation trend could pave the way for policy changes. David Smith, portfolio manager at Henderson High Income Trust plc, noted that while the U.K. has endured more persistent inflation than the U.S. or eurozone, the latest figures suggest momentum is shifting. According to him, inflation could drop to 2% before year-end, potentially giving the Bank of England room to consider further interest rate cuts.
Currency and bond markets reacted cautiously. The British pound held steady against the dollar at $1.3562, while government bond yields — commonly known as gilts — remained largely unchanged. Earlier in the week, sterling had dipped after data revealed the U.K.’s unemployment rate climbed to a five-year high and wage growth slowed, underscoring the fragile balance policymakers must manage.
Beyond Europe, global investors are keeping a close eye on developments in the United States and Asia. Several Asian markets were closed for Lunar New Year holidays, leading to lighter trading volumes. Meanwhile, U.S. futures hovered near flat ahead of the release of minutes from the Federal Reserve’s January meeting. Traders are also awaiting Friday’s personal consumption expenditures (PCE) price index — the Fed’s preferred inflation gauge — which could provide clearer direction for global markets in the days ahead.
source: cnbc