European markets edge higher as UK inflation slows

European markets traded higher on Wednesday as investors reacted to a cooler-than-expected inflation reading out of the U.K. and awaited U.S. inflation data that will inform the Federal Reserve’s decision-making on interest rate cuts.

The pan-European Stoxx 600 was around 0.3% higher during early deals, with most sectors and all major bourses in positive territory shortly after the opening bell.

London’s FTSE 100 was 0.6% higher at 9:05 a.m. London time, after official data showed U.K. inflation fell to a lower-than-expected 2.5% in December. Economists polled by Reuters had anticipated the reading would remain unchanged from the 2.6% print of November.

Global market focus on Wednesday is on the U.S. consumer inflation index, which will be out at 8:30 a.m. ET. Economists polled by Dow Jones see headline CPI rising 0.3% on a monthly basis and gaining 2.9% over the prior 12 months.

The data will come hot on the heels of December’s wholesale inflation report, which came in lighter than expected. The producer price index added just 0.2%, less than the Dow Jones consensus estimate for a 0.4% increase.

Both reports will inform the Fed’s interest rate policy when it meets later this month. Fed funds futures trading suggests a near-certainty that the Fed will hold steady on interest rates at the conclusion of its two-day meeting later this month. Markets pricing also suggests a 97% chance of rates staying at their current target range of 4.25%-4.5% in March, according to the CME FedWatch Tool.

Global bond yields continue to rise as traders expect a slower pace of interest rate cuts this year, with both signs of economic strength and potential weakness ahead. Jobs data last week showed nonfarm payrolls grew much faster than expected in December, but President-elect Donald Trump has said he will enact tariff policies when he takes office, which are predicted to be inflationary.

Trading updates are set to come from Experian and Hays on Wednesday.

Investors stateside will also be keeping an eye on big bank earnings Wednesday: JPMorgan Chase, Citigroup, Goldman Sachs and Wells Fargo are set to post fourth-quarter results. Morgan Stanley and Bank of America are slated to report on Thursday.