European markets cautious; World Economic Forum kicks off in Davos - CNBC

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European markets were muted on Monday as investors assessed the growth and inflation outlook in light of recent data alongside the beginning of corporate earnings season.

The pan-European Stoxx 600 index was up 0.1% by mid-morning, with health care stocks adding 0.7% while travel and leisure dropped 0.7%.

The World Economic Forum in Switzerland is a key focus for European markets this week. Heads of state and business leaders mingle with academics and innovators in Davos. The key themes for delegates to debate and discuss are the war in Ukraine, economic instability and uncertainty and climate change, among other things.

Stocks on the move: Temenos up 5%, Tecan down 4%

Temenos shares gained more than 5% in early trade to lead the Stoxx 600 after the Swiss software company announced that CEO Max Chuard would step down.

At the bottom of the European blue chip index, compatriot laboratory equipment maker Tecan Group fell 4% after Kepler Cheuvreux downgraded the stock from "buy" to "hold" and cut its target price.

- Elliot Smith

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Inflation outlook softens again, traders fully price in quarter-point rate hike

Declining inflation expectations from consumers is coinciding with expectations that the Federal Reserve is likely to step down the level of interest rate increases in a few weeks, and end them altogether soon.

The University of Michigan consumer sentiment survey on Friday showed the one-year inflation outlook down to 4%, the third straight monthly decrease and the lowest level since April 2021.

At the same time, traders assigned a 94.2% chance of a 0.25 percentage point interest rate increase on Feb. 1, when the Fed's next two-day meeting concludes. That marks another a smaller move than the 0.5 percentage point hike in December, which itself was a deceleration from four straight 0.75 percentage point increases.

"Inflation expectations are well-anchored and improving as pricing pressures are weakening across many sectors. The Fed will likely hike by 0.25% at the upcoming meeting later this month," LPL Financial chief economist Jeffrey Roach said. "We shouldn't be surprised if the Fed starts talking about pausing in the near future."

—Jeff Cox

European markets: Here are the opening calls

European markets are heading for a higher open Monday as investors gauge the inflation outlook globally after positive signs from U.S. data last week.

The U.K.'s FTSE 100 index is expected to open 10 points higher at 7,856, Germany's DAX 84 points higher at 15,174, France's CAC up 43 points at 7,063 and Italy's FTSE MIB up 142 points at 25,895, according to data from IG.

Data releases include Germany's ZEW survey of economic sentiment for January and preliminary Italian inflation figures for January. The World Economic Forum begins in Davos, Switzerland, on Monday.

— Holly Ellyatt

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