European stocks gain ahead of key economic data from US, UK, and Eurozone

European equity markets made modest gains overnight ahead of a big week of economic data in the US, Eurozone, and UK.

While the US CPI release will claim centre stage tonight, an expected rise in UK inflation on Wednesday night, which will be followed by a soft UK GDP number on Thursday, will provide another reason for the embattled FTSE to continue to underperform its peers post the recent hawkish BoE meeting,

Ahead of the inflation and GDP data, the UK rates market, which before the BoE meeting had a total of 100bp of rate cuts priced for 2024, has postponed its expectations of a first BoE cut from May until August, and now has only three rate cuts in total priced for 2024.

What is expected from the UK inflation report for January (Wednesday, February 14th at 6.00pm)

In December, the annual rate of headline inflation surprised to the upside at 4%, above consensus expectations, looking for a fall to 3.8%. It was the first rise in inflation in ten months and appears to have played a central role in last month’s hawkish Bank of England interest rate meeting.

In January, the preliminary consensus expectation is for annual headline inflation to rise to 4.2% YoY from 4%, above the BoE’s projection of 4.1% YoY. Core inflation is expected to increase to 5.2% YoY from 5.1% in November and December.

UK core inflation chart

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