STOXX 600 up 0.1%
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Tech top gainer
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Most Asian markets shut
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U.S. stock futures a touch lower
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ECB NEEDS MORE THAN SOFTER HEADLINE INFLATION TO PIVOT - UBS(1147 GMT)
The fall in euro zone inflation in December is not enough to warrant the ECB changing tack, UBS economists say.
Brushing off recent press reports of a potential 25-bps hike from the ECB at its March meeting, the economists expect two back-to-back 50-bp increases from the ECB in February and March.
Their view is supported by comments from ECB governing council member Klaas Knot, who on Sunday said he expects the central bank's main interest rate to rise 50 bps in both February and March and to keep climbing after that.
An improvement in the broader inflation environment, not just headline numbers, is needed for a central bank pivot, UBS said. That would include "measures of core inflation, underlying inflation, inflation expectations, and wage dynamics".
Lower energy prices were behind December's fall in headline inflation to 9.2%, from October's peak at 10.6%. But core inflation kept rising, hitting 5.2%.
Other metrics, such as inflation expectations surveys, also provided little relief.
"...the ECB’s surveys of professional forecasters (SPF) and of monetary analysts (SMA), as well as market-based inflation expectations (5y5y forwards), have on balance moved marginally higher and remain above the ECB target," the note reads.
The UBS economists also flag the potential for "pro-inflationary second-round effects" as euro zone nominal wage growth continues to pick up.
They expect a further decline of 0.2% in headline inflation in January, taking it to 9%, and a decline in core inflation to 5% from 5.2%.
January inflation data is due on February 1.
TECH LEADS, FRESH HIGHS FOR FINANCIALS (0900 GMT)
Hawkish ECB speak at the weekend and the late tech-led rally on Wall Street on Friday are giving shape to today's open across European equity markets, pushing financials to fresh highs and making tech the best sectoral performer.
The STOXX Europe Tech index recovered part of Thursday's slump to gain more than 1%, banks and insurance stocks - which benefit from rising interest rates - both rose to fresh 11-month highs before retracing.
Aerospace and defence stocks hit a fresh near 3-year peak, just shy of the pre-COVID levels of 2020 and were last little changed. The broader STOXX 600 benchmark index was up by 0.2%, still below the April 2022 peak hit last week.
Here's your opening snapshot:
EUROPEAN STOCK FUTURES EDGE HIGHER (0738 GMT)
European shares look set to start the final full week of January on a good footing, with EuroSTOXX50 index futures rising around 0.5%, even as the euro touches its highest since April 2022 against the dollar.
Hawkish weekend comments from ECB governing council member Klaas Knot are keeping the currency supported and later in the day the focus will shift to ECB President Christine Lagarde.
Most Asian markets were closed for Lunar New Year, while U.S. futures pointed to a muted start on Wall Street following Friday's rally that pushed the tech-heavy Nasdaq up 2.7%, its biggest one-day gain since November, up 2.7%.
In European corporate news, steep falls are expected for Symrise after the flavour and fragrance maker warned its 2022 results will miss expectations due to an impairment.
In the UK, Dignity is set to rally on news of an takeover offer that values the funeral services provider at a 9.9% premium to Friday's closing price.
EURO RISING (0649 GMT)
It's been a quiet start to the week in Asia with much of the region on holiday. U.S. stocks futures are near flat, but EUROSTOXX futures added 0.5% to extend their recent bullish run.
Presumably much of that is due to the 60% drop in European gas prices since December and relief that the worst fears of an energy crunch have not come about, even if it has turned a bit colder in recent days.
Analysts assume the same sea change will deliver an improvement in the EU flash PMIs for January this week, likely outperforming the U.S. surveys.
This has combined with some hawkish words from ECB Governing Council member Knot to lift the euro to a fresh nine-month high at $1.0903 and challenge the April spike top at $1.0936.
Knot is considered a card-carrying member of the ECB hawk club, which was clearly irked by recent reports that the central bank might step down to quarter-point hikes in March.
The latest Reuters poll of analysts tips hikes of 50 basis points in both February and March and a peak of 3.25%, while the Fed is now thought certain to go by 25 basis points next week.
Minutes on Monday of the Bank of Japan's December meeting, where they shocked markets by widening the yield curve band, were striking in how dovish board members still were. The move really was aimed at dysfunction in the bond market and was not a flag of future tightening or dropping YCC altogether.
Members were keen that the BOJ explain to markets that the change was not a step toward an exit from policy easing, something it clearly failed at in the official statement.
Indeed, most of the discussion was about the importance of maintaining stimulus, a stance Governor Kuroda repeated more forcibly after last week's meeting.
Going by all this, if YCC is to change it will likely be under the new governor in April, and it is not clear the whole board would agree with it.
Key developments that could influence markets on Monday:
- ECB's Lagarde and Panetta are appearing
- No major economic data due on Monday. Around a quarter of the S&P 500 report this week starting with Microsoft on Tuesday.
