Slow start in Europe, with Rightmove house price surge kicking off big week for UK data

• European markets off to slow start as US holidays bring lower volumes
• Red sea issues continue, as Qatar reroutes LNG shipments
• UK in focus this week, with Rightmove data highlighting house price bounce

European markets look somewhat lost in early trade today, struggling for direction as we head into a fresh week of corporate and economic uncertainty. Today represents a slow start thanks to the absence of a US influence, with the MLK holiday meaning that the Q4 earnings season pauses after Friday saw the big banks fire the starting gun. The dollar appears to have found a more solid footing of late, with the markets looking relatively unstable despite the fact that the Nasdaq and Dow have both managed to breach record highs. Nonetheless, that tells just half the story, as market expectations around monetary easing from the Federal Reserve look increasingly unlikely thanks to an inflation outlook that looks highly unlikely to get near the 2% target by the time the March FOMC meeting comes around. Something has to give, and the current market expectations for seven hikes in seven meetings from March look highly unlikely given the solid economic environment and 3.4% inflation rate.

Market concerns over transit through the Red Sea continues in the wake of the US/UK-led attack on Houthi positions in Yemen last week. The weekend decision from Qatar to stop sending their LNG vessels through the straight highlight ongoing disruptions to the energy market, with European central bankers likely to remain concerned over the potential for logistical disruptions for gas given their recent switch away from Russian pipeline supplies.

This week sees the UK in focus amid a deluge of data that will undoubtedly be headed up by Wednesday’s inflation readout. Wage data due on Tuesday provides a reminder over the elevated underlying pressures being felt by UK businesses, with the 7.2% average earnings figure seen last time around standing in stark contrast to the 3.9% CPI figure. Markets are currently pricing five rate cuts this year from the Bank of England, following an expected first dovish pivot at the May meeting. Today’s UK data has centred around the housing market, with Rightmove highlighting a 1.3% rise in house prices that represents the best performance in eight months. Crucially, the move towards a dovish shift from the BoE has helped drive down mortgage rates, and it is clear that we are finally seeing sentiment in the housing market turn a corner.