Europe Holds Steady After U.S. Inflation Data: Markets in Delicate Balance

• How Did European Markets Perform Amid U.S. Inflation News?
• What Did the U.S. Inflation Report Reveal?
• Why Is the Fed Under Political Pressure?
• How Did Corporate Earnings Kick Off?
• Which Sectors Struggled in Europe?
• What’s Next for Global Markets?
• Frequently Asked Questions

European markets treaded cautiously as U.S. inflation figures came in line with expectations, offering little impetus for the Federal Reserve to adjust rates soon. The CAC 40 dipped slightly, while the DAX 40 extended its record-breaking rally. Meanwhile, corporate earnings season kicked off with mixed results from banking giant JPMorgan. Here’s a deep dive into the day’s financial pulse.

How Did European Markets Perform Amid U.S. Inflation News?

European indices showed restraint following the latest U.S. inflation report. France’s CAC 40, after hitting back-to-back record highs earlier in the week, spent the entire session below its equilibrium point, closing down 0.14% at 8,347.20. Germany’s DAX 40, however, defied gravity—barely—to notch its tenth consecutive gain (+0.02% to 25,411.44), another all-time high. Over the past ten sessions, the DAX has surged 4.64%, with 3.76% of that coming in 2026 alone. "It’s like watching a tightrope walker add another plate to their stack," remarked a BTCC analyst. "The DAX’s resilience is impressive, but sustainability questions linger."

What Did the U.S. Inflation Report Reveal?

December’s Consumer Price Index (CPI) ROSE 0.3% month-over-month (MoM) and 2.7% year-over-year (YoY), matching forecasts. Core CPI (excluding food and energy) surprised slightly to the downside at +0.2% MoM (vs. 0.3% expected), easing annual core inflation to 2.6%. "This is a ‘Goldilocks’ print—not hot enough to panic the Fed, not cold enough to force cuts," observed TradingView data. CME’s FedWatch Tool still prices a 97.2% chance of unchanged rates at the next meeting, with the first likely cut deferred to mid-June.

Why Is the Fed Under Political Pressure?

Fed Chair Jerome Powell faces mounting scrutiny, with former President Donald TRUMP recently suggesting the Justice Department might investigate Powell over Fed building renovations—a move Powell called a "pretext" for political pressure. In a rare show of unity, global central bankers (including ECB’s Christine Lagarde) issued a joint letter defending Fed independence as "the cornerstone of price stability." As one veteran trader quipped, "When central bankers start writing love letters, you know the political heat is real."

How Did Corporate Earnings Kick Off?

JPMorgan (-3.20% to $314.12) posted better-than-expected Q4 earnings, though profits fell YoY. CEO Jamie Dimon struck a cautious tone: "Markets are underestimating risks—geopolitics, sticky inflation, and bloated asset prices." The earnings baton passes next to Bank of America, Wells Fargo, and Citigroup (Wednesday), followed by Morgan Stanley and Goldman Sachs (Thursday).

Which Sectors Struggled in Europe?

French infrastructure firms Vinci and Eiffage slumped after transport ministers proposed extracting €2.5 billion extra from highway operators. Saint-Gobain joined the losers’ club, dragged down by disappointing results from Swiss peer Sika. "When governments come knocking for cash, investors run for the exits," noted a Paris-based trader.

What’s Next for Global Markets?

With inflation stabilizing and earnings season accelerating, markets face a tug-of-war between corporate fundamentals and central bank policies. As the BTCC team notes, "The DAX’s streak feels like a party that’s gone on too long—everyone’s waiting for the music to stop." Key watchpoints include:

• Thursday’s ECB meeting minutes
• U.S. retail sales data (January 16)
• Ongoing geopolitical tensions in the Middle East