European Stocks Mixed as Investors Await Inflation Cues

European stock markets displayed a mixed performance on Tuesday, with the return of U.K. markets after a holiday break. Investors eagerly anticipated key inflation data from both Europe and the United States, seeking insights into the future direction of monetary policy.

Early in the trading day, Germany’s DAX index edged up 0.2%, while France’s CAC 40 dipped 0.1%. The UK’s FTSE 100 also experienced a minor decline of 0.1%.

Inflation Data in the Spotlight

The FTSE 100 lagged behind other indices as UK markets reopened after Monday’s late May bank holiday. Despite the slight underperformance, overall sentiment remained positive, bolstered by dovish remarks from several European Central Bank (ECB) officials.

ECB policymaker Francois Villeroy de Galhau indicated in a recent interview that the central bank has ample room for rate cuts and current market expectations for long-term easing are justified.

While the ECB has all but confirmed an interest rate cut in June, the subsequent path remains unclear. ECB chief economist Philip Lane stated that the pace of rate adjustments will depend on the strength of underlying inflation and demand.

Investors eagerly awaited the upcoming eurozone inflation data release on Friday, which is projected to show a slight increase to 2.5% in May year-on-year, up from 2.4% in April. Underlying inflation is expected to remain steady at 2.7%.

Across the Atlantic, the Federal Reserve’s preferred inflation gauge, the personal consumption expenditures (PCE) price index, is also due on Friday. This data will be closely analyzed for clues about the trajectory of U.S. interest rates throughout the year.

Additionally, market participants will have the opportunity to hear from several Fed speakers during the week, including Governor Michelle Bowman, Cleveland Fed President Loretta Mester, Governor Lisa Cook, New York Fed President John Williams, and Atlanta Fed President Raphael Bostic.

European stock markets exhibited a mixed performance as investors awaited crucial inflation data from both sides of the Atlantic. The FTSE 100 slightly underperformed due to the return of UK markets from a holiday break, but positive sentiment prevailed following dovish comments from ECB officials. The upcoming eurozone inflation release and the U.S. PCE price index will be key in shaping expectations for future monetary policy decisions. Additionally, insights from various Fed speakers throughout the week will be closely watched by market participants.