Europe bulletin: UK inflation, stocks hit highs, ECB succession talk

Europe starts the day with easing inflation signals, shifting rate expectations, and fresh political intrigue.

UK price pressures cooled in January, reinforcing bets on a near-term Bank of England rate cut even as services inflation stays sticky.

London stocks pushed to new highs amid softer labour data. On the continent, succession talk has resurfaced at the ECB following reports about Christine Lagarde’s future.

Meanwhile, Finland struck an optimistic note on the EU’s new trade deal with India.

UK inflation eases to 3%

Britain’s headline inflation eased to 3.0% year on year in January from 3.4% in December, matching economists’ expectations and marking the coolest print since March 2025.

Services inflation, the stickier metric the Bank of England watches for domestic pressure, only nudged down to 4.4% from 4.5%, staying above forecasts.

The drop was helped by slower rises in transport and in food and non-alcoholic drink prices, according to official data.

With inflation still above the 2% goal but set to fall further as last year’s regulated price jumps roll off, markets have leaned toward a March rate cut as March nears.

FTSE 100 hits new records

London shares edged higher as softer UK jobs figures nudged traders toward a near‑term Bank of England cut, even as miners slipped on weaker metal prices.​

The FTSE 100 was up about 0.2% while the FTSE 250 dipped, after data showed unemployment rising to 5.2% and wage growth cooling; sterling eased as markets priced roughly an 80% chance of a quarter‑point cut next month.​

Defence names and precious‑metal miners lagged as geopolitical nerves eased, while Antofagasta fell despite a sharp jump in annual core profit and Plus500 slid on insider share sales.

ECB President planning to step down

A Financial Times report has revived succession chatter at the European Central Bank, saying Christine Lagarde is expected to step down before her eight‑year term ends in October 2027.​

The paper said she is keen to leave ahead of France’s presidential election next year, giving Emmanuel Macron and Germany’s Friedrich Merz a say in choosing her successor.​​

The ECB played it straight: a spokesperson said Lagarde is focused on her mission and has not made any decision on the end of her term, despite earlier guidance she would serve it out.

​Finland confident on India trade deal

Finland’s Prime Minister Petteri Orpo said he sees no political roadblocks inside the EU to implementing the bloc’s newly struck trade deal with India, arguing the agreement is exactly what the world needs amid a drift toward tariffs.​

Orpo spoke after meeting Prime Minister Narendra Modi in New Delhi, saying an informal European Council discussion last week showed unusual unity and satisfaction over the pact.​

The deal, reached late last month, is expected to be implemented within a year, though EU ratification can be messy, as the Mercosur agreement has shown.​