European Shares Seen Lower As Traders Temper Rate Cut Expectations

European stocks may open on a sluggish note Tuesday as investors temper rate cut expectations.

European Central Bank’s Joachim Nagel said on Monday that inflation remains high and it’s too early to discuss cutting interest rates.

Additionally, ECB Governing Council member Robert Holzmann warned that it’s possible there will be no rate cuts this year.

Traders now look to Federal Reserve Governor Christopher Waller’s speech later in the day, whose dovish turn in late November helped to send markets soaring.

Asian stocks traded mostly lower this morning, with Japanese markets halting their record-breaking rally as the Middle East crisis escalated.

Houthi rebels have reportedly hit a U.S.-owned cargo ship with a ballistic missile off the coast of Yemen, days after the U.S. and U.K. launched joint strikes against the Iran-backed militant group.

Ship tracking data showed more oil tankers altering course away from the Red Sea in response to attacks in the area by Yemen’s Houthi movement.

The dollar advanced ahead of a data-heavy week, with reports on Chinese fourth-quarter growth, British inflation and U.S. retail sales awaited.

German consumer price inflation data, ZEW survey results and U.K. unemployment data may garner investor attention later in the day.

Following Friday’s flurry of reports from major U.S. banks, Goldman Sachs Group and Morgan Stanley are set to report their earnings later today.

Gold ticked lower as Treasuries fell across the curve amid uncertainty over U.S. interest rates.

Global benchmark Brent crude futures held above $78 a barrel, while West Texas Intermediate traded below $73.

U.S. markets were closed Monday for Martin Luther King Jr. Day.

European stocks snapped last week’s rally on Monday as China’s central bank wrong footed markets by skipping on a rate cut and ECB officials warned cutting interest rates too fast could fuel a new wave of inflation.

The pan European STOXX 600 dropped half a percent. The German DAX slipped half a percent, France’s…