European stocks rally following US and UK inflation data

European stock markets recorded their best day since August on Wednesday after CPI data from the US and UK signalled cooling inflation. The Euro Stoxx 600 Index ended a three-day losing streak, climbing 1.33% - its largest one-day rally in nearly five months. 

Risk-on sentiment prevailed in the global markets as cooling inflation further enhanced bets for continued rate cuts by central banks. 

Germany's benchmark, the DAX rose 1.5%, reaching a new record high. The index outperformed global major averages, gaining 3.34% this year. The rally may have been driven by expectations for the ECB to implement more aggressive rate cuts compared with other central banks, despite domestic economic and political challenges. 

The FTSE 100 advanced 1.21%, recovering from last week's British bond turmoil, while France's CAC 40 gained 0.69%, continuing to lag its peers. 

However, the euro pared early week gains against the US dollar, with the euro-dollar pair slightly weakening to 1.0288 as of the early Thursday Asian session. The common currency has also retreated against the pound sterling after hitting a nearly five-month high last week. 

Wall Street also experienced a strong rally, particularly in the technology shares. Robust big US bank earnings from JP Morgan Chase, Citigroup, Wells Fargo, and Goldman Sachs, have further supported the upside momentum. 

Inflation from both sides of the Atlantic showed signs of cooling. In the US, core inflation (excluding volatile items like food and energy) fell to 3.2% year-on-year in December, down from 3.3% in November, although headline inflation remained slightly elevated.

That followed cooler-than-expected producer price index (PPI) data on Tuesday, increasing the likelihood of continued Federal