A Look at the Day Ahead in European and Global Markets from Rae Wee

Investors started Wednesday without new U.S. tariffs news, redirecting their focus to the upcoming U.S. inflation report and insights on Federal Reserve policy.

Expectations suggest a slight slowdown in January’s core inflation to an annual 3.1%, with the headline number expected to remain steady at 2.9%. Yet, analysts warn that progress in controlling inflation may stall later in the year. This inflation report marks the last reading before any impact from U.S. President Donald Trump’s recent tariff measures, which took effect this month.

Fed Chair Jerome Powell is also scheduled for a second day of testimony before Congress right after the release of consumer price data, allowing timely reactions from the Fed. However, he is likely to reaffirm the central bank’s cautious stance on future rate cuts, especially with the ongoing uncertainty regarding the extent of Trump’s tariffs and their impact on the global economy.

Ahead of the day’s events, European stocks anticipated a positive start, continuing their rally from a record close in the previous session. EUROSTOXX 50 futures rose by 0.24%, while DAX futures increased by 0.33%. Despite issues surrounding global trade, the benchmark STOXX index has gained nearly 8% this year, as many analysts consider Trump’s tariffs as negotiating strategies while investors remain focused on corporate earnings.

Chris Weston, head of research at Pepperstone, highlighted positive influences from robust earnings in European companies, suggesting that European growth may soon hit a low point. Nevertheless, investors still harbor concerns about escalating trade tensions.

Major U.S. trading partners condemned Trump’s latest tariffs on steel and aluminum, with EU Commission President Ursula von der Leyen promising strong and proportionate counteractions. The governments of Mexico and Canada also expressed their dissatisfaction, while Japan’s Industry Minister Yoji Muto announced a request for exemption from these tariffs.

Meanwhile, gold experienced a setback after reaching successive record highs, even though the $3,000 an ounce milestone is still attainable. Inflationary fears from a global trade war are significant factors contributing to gold’s 10% surge this year. Additionally, central banks have been substantial buyers while investors seek safe havens. Concerns over U.S. tariffs on gold have led to an urgent effort to transfer gold from London vaults to the U.S.

Key Developments Influencing Markets on Wednesday:

• U.S. inflation report (January)
• Powell’s testimony
• Heineken NV (OTC:HEINY) earnings release
• CVS Health (NYSE:CVS) earnings release