• European markets higher despite US declines.

  • German Gfk rise fails to lift sentiment as focus turns to inflation data.

  • US core durable goods in view.

European indices are moving cautiously higher in early trade, following on from a cautious US session that saw big tech lead the declines thanks to a 4.5% decline in Google shares. Last week’s Nvidia-led boost for US tech names appears to be taking a breather for now, as earnings season draws to its conclusion. With strong earnings having led indices through the past month unscathed, it is the gains within the likes of the US dollar which highlight the effects of recent readjustments to interest rate expectations. Nonetheless, as the impact of US earnings start to fade, there is a concern that markets gradually turn their focus back to economic data, starting with Thursday’s core PCE inflation gauge.

The German economy came back into focus once more this morning, with the Gfk consumer climate remaining in the doldrums despite a tentative move higher to -29.0. With this metric having traded in negative territory for over two-years now, the German consumers will be hoping for a brighter year ahead if the ECB finally start to turn the taps back on. The release of German (Thursday) and eurozone (Friday) CPI data this week provides a fresh reminder of the impending ECB pivot in the months ahead, helping to further justify the record highs habitually posted by the DAX.

Looking ahead, today sees US core durables good and consumer confidence data due later on. Concerns around the US economic health remain few and far between, with the relatively non-existent soft landing serving to raise cautious for those expecting the Federal Reserve to implement a raft of rate cuts this year. Nonetheless, with the cost of borrowing elevated, Jay Powell seems happy to move ahead of a return to 2%.

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