• Tech rally comes under threat as chipmaker expectations outrun earnings.
• Automotive sector sees downside pressure after EU regulators raid tire manufacturers.
• Germany CPI inflation came in below expectations, pan-EU CPI due Thursday.

European equities saw some weakness on Wednesday with Germany’s DAX index declining four-tenths of a percent after German Consumer Price Index (CPI) inflation missed forecasts, and rising costs associated with developing AI-based hardware and software products irks investors who aren’t seeing as much gain in revenues as hoped for on the back of rising demand for AI-powered products.

Germany’s annualized CPI inflation came in below expectations, printing at 2.9% YoY in January versus the 3.2% forecast and falling even further from the previous period’s 3.8%. With inflation in the German economy receding faster than expected, the Euro area’s key economic powerhouse within the union, markets are stepping into bets of higher and faster rate cuts from the European Central Bank (ECB) ahead of Thursday’s broader EU Harmonized Index of Consumer Prices (HICP).

pan-EU annualized HICP inflation for the year ended in January is forecast to tick down from 2.9% to 2.8% YoY. Money markets now see 150 basis points in rate cuts from the ECB through the end of 2024, up from Tuesday’s 140 bps rate trim forecast