European markets attempt to claw back losses despite Spanish CPI rise

• European markets attempt to claw back gains, but higher Spanish inflation highlight concerns
• US data in view as markets grow concerned over Fed rate outlook
• Dell and CostCo earnings set to dominate

European markets are attempting to regain lost ground after a sharp collapse that saw equities throughout the US, Asia and Europe tumble. At the heart of this move was a surge in US treasury yields, as weak demand for the latest seven-year treasury auction brought concerns that we might see yields have to rise further due to a higher-for-longer outlook around US interest rates. The inflation theme has continued apace today, with Spanish CPI rising to 3.6% in the wake of a similar rebound in German inflation yesterday. With Australia, Spain, Germany, France, Italy, and the wider eurozone figure all expected to rise this week, there are significant concerns that central banks will increasingly find themselves restricted to minimal easing at best this year. European markets have by and large enjoyed a period of relative strength of late, but the increased inflation figures seen this week have helped dampen expectations around a third rate that markets had previously priced as a 50% possibility.

Today sees the US economy come back into the limelight, with the latest revision of the Q1 GDP figure released alongside trade balance and unemployment claims data. Coming off the back of a period that saw market sentiment set back by stronger-than-expected PMI, durable goods, and consumer sentiment surveys, markets will be firmly looking at todays data through the prism of a ‘bad news is good news’.

US earnings season rolls on, with CostCo and Dell providing the most notable reports to watch out for after the close today. From a CostCo perspective, investors have clearly jumped onboard thanks to the company’s positioning as a means to bring down the cost of shopping by buying in bulk. CostCo have remarkably noted that they have felt minimal price pressures over the course of the first quarter, helping to allow the company in its bid to remain highly competitive at a time when shoppers are becoming increasingly price sensitive. Elsewhere, Dell shareholders will hope that the computing giant will increasingly benefit from the introduction of AI-enabled computers, bringing a fresh upgrade cycle that could last for years as products become increasingly differentiated from the traditional Dell product.