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European equity markets edged higher on Wednesday, supported by a steady stream of encouraging corporate earnings and fresh data showing a sharp slowdown in U.K. inflation, which reinforced expectations of an interest rate cut by the Bank of England.
By 03:15 ET (08:15 GMT), Germany’s DAX rose 0.7%, France’s CAC 40 gained 0.5%, and the U.K.’s FTSE 100 advanced 0.5%, reflecting a broadly positive tone across the region.
Earnings Season Provides Support
European stocks also took modest cues from small gains on Wall Street overnight, even as investors remain cautious about stretched valuations linked to artificial intelligence and the broader economic impact of rapid AI adoption.
Still, the earnings season continues to underpin sentiment. According to LSEG data, around 60% of European companies reporting so far have beaten earnings expectations, above the long-term average of about 54% in a typical quarter.
At the company level, miner Glencore reported lower full-year earnings, as record-high copper prices were not enough to offset weaker profitability in its coal business. In contrast, British defense contractor BAE Systems announced higher shareholder payouts after defense orders climbed to a record level, benefiting from increased military spending across Europe and the United States.
Swiss dental implants maker Straumann Group exceeded fourth-quarter sales expectations and delivered margins in line with guidance. However, the company flagged continued pressure on growth in China and warned that currency effects are likely to weigh on reported earnings in 2026.
Elsewhere, Nordic real estate firm Castellum posted a fourth-quarter net loss due to negative property revaluations, although income from its property management operations continued to grow.
U.K. Inflation Drops to Multi-Month Low
Macroeconomic data also lifted sentiment, particularly in the U.K., where inflation cooled sharply in January. The Office for National Statistics said consumer prices rose 3.0% year on year, slowing from 3.4% in December and marking the lowest inflation rate since March last year.
While inflation remains above the Bank of England’s 2% target, the central bank expects price pressures to ease further in coming months, as last year’s increases in energy bills and other regulated prices drop out of annual comparisons. BoE officials have indicated that inflation could move close to target by April.
Markets are now largely pricing in a rate cut at the Bank of England’s March meeting, with expectations that the benchmark interest rate could be reduced to 3.5% following a closely split decision to hold rates steady in February.
Inflation pressures also eased elsewhere in Europe. In France, annual consumer price inflation slowed to 0.4% in January from 0.7% in December, adding to signs that price growth across the region continues to moderate.
Overall, easing inflation dynamics combined with resilient corporate earnings are helping support European equities, even as investors remain alert to risks surrounding growth, geopolitics, and the evolving role of artificial intelligence in the global economy.
