European markets head higher as crude spike fails to materialise

• European markets head higher as crude falls despite Israeli offensive
• German inflation and growth data highlights growing confidence that ECB will hold rates from here on in
• Earnings dominate this week, with Apple the highlight after recent tech losses

European markets have taken on a distinctly upbeat tone as we commence a week that promises plenty of volatility across the board. Fears around a potential spike in energy prices upon the commencement of the Israeli ground offensive appear to have brought a ‘buy the rumour, sell the fact’ situation, with crude heading lower in early trade. Given the risk higher energy prices pose to inflation and monetary policy expectations, today’s decline in WTI and Brent is a welcome development for both investors and central bankers alike.

Early data out of the eurozone once again hammered home the point that the ECB tightening phase is likely over, with inflation expectations easing as growth slows. With tomorrows eurozone inflation gauge expected to fall a whopping 1.2%, todays Spanish and German CPI figures provide the basis for expectations over whether that will come to fruition. Spanish CPI came in well below expectations, remaining at 3.5% for October. Meanwhile, forecasts of a sharp decline in German inflation look to be correct given the dramatic weakening seen in regional figures out of North Rhine Westphalia (4.2% to 3.1%), Baden Wuerttemberg (5.1% to 4.4%), Bavaria (4.1% to 3.7%), and Hesse (4.7% to 3.6%). With German inflation heading sharply lower, this morning’s third quarter growth figure of -0.1% highlights why the ECB will likely see the Bundesbank push the need to pause tightening in fear of doing more damage.

This week represents the busiest of the third quarter earnings season, with over 30% of the S&P 500 reporting over the course of this five-day period. Last week saw big tech dominate, with the wider risk-off sentiment seeing an incredibly unforgiving environment even when managing to beat on both top and bottom-line growth. With both the Nasdaq and S&P 500 falling into contraction territory last week, there is a hope that some will see this as a buy-the-dip situation given the lack of any sharp uptick in energy markets this morning. Apple earnings look to dominate this week, with just Nvidia left to report after that.