European markets head for mixed open ahead of EU and U.S. inflation prints

European markets anticipate a mixed open ahead of critical inflation data from major regional economies and the U.S. PCE index, with an 85% probability of a September Fed rate cut priced in following recent dovish signals. Concurrently, spirits maker Remy Cointreau revised down its expected operating profit impact from U.S. tariffs to €20 million due to a new US-EU trade deal setting baseline duties. Despite weekly volatility, the broader Stoxx 600 index is poised for its second consecutive monthly gain.

Analysis

European markets are positioned for a cautious session, with investor focus squarely on upcoming inflation data from France, Spain, Italy, and Germany, which will serve as a critical precursor to the Eurozone's flash August reading. This heightened attention on price pressures extends to the U.S., where the Personal Consumption Expenditures (PCE) price index is a key determinant for Federal Reserve policy. The market has already priced in a significant dovish tilt, with interest rate futures indicating an 85% probability of a September rate cut following recent commentary from Fed Chair Powell. Despite weekly market weakness, influenced by French political news and earnings from Nvidia, the regional Stoxx 600 index is on track for a circa 1.4% gain in August, marking its second consecutive positive month and suggesting underlying resilience. On a corporate level, easing trade tensions are providing a tangible lift, evidenced by Remy Cointreau lowering its expected operating profit impact from U.S. tariffs to €20 million from a prior €35 million, following a new US-EU trade agreement.

Key Decisions for Investors

• Investors should prepare for potential volatility surrounding the release of European and U.S. inflation data, as any surprises could significantly alter market expectations for central bank policy.
• The positive revision from Remy Cointreau highlights an opportunity in European exporters sensitive to U.S. tariffs; exposure to this theme could be beneficial as trade relations appear to be normalizing.
• Given the Stoxx 600's resilience and the high probability of a Fed rate cut priced in, investors might consider the recent weekly dip as a buying opportunity, though this outlook is heavily contingent on the forthcoming inflation reports not coming in unexpectedly high.