European shares rose in early trade, moving towards their highest point in nine months, as official figures showed the British economy unexpectedly grew in November.
Investors, who are awaiting earnings from big US banks, are also digesting data out of the US showing that the annual rate of inflation eased back to 6.5% in December.
Consumer prices fell back in the month by a very marginal 0.1%, but it was the first monthly fall in inflation in almost three years.
"It's very significant," Paul Sommerville of Sommerville Advisory Markets told Morning Ireland.
"Inflation peaked back in October in the USA. The market realises this but it takes time to work through the data. By my calculation, by May we should be well below 3% inflation in the US," he said.
He added that the market was pricing in a pausing in interest rate hikes by the US Federal Reserve and even a cut to rates from the level they have raised them to in recent months.
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"Markets are already pricing in two interest rate cuts in 2023 for the Federal Reserve. The markets are confident that inflation is dissipating very rapidly in the US. The Fed just hasn't got the memo yet," he explained.
Mr Sommerville said the eurozone economy was performing better than the outlook at the end of last year and that the bloc may actually avoid a recession now.
He cited the reopening of the Chinese economy and the decline in European gas prices as reasons for optimism.
"We see that in the equity markets. World equities outside of the US are outperforming the US markets hugely. The DAX is up 7% already this year. European banks are up 40% in the last three months," he explained.
The performance of markets in the short term will likely be dictated by data with investors looking to earnings season for signs of a more resilient growth outlook.
Figures from the Office for National Statistics this morning showed that the UK economy unexpectedly grew by 0.1% in November.
In the three months to the end of November, the economy contracted by 0.3%.
The Bank of England has projected that the UK has already entered its longest recession on record, but some analysts are now revising their outlook for the British economy.
