A look at the day ahead in European and global markets from

Wayne Cole.

The market reaction has been relief at the election of the

relatively mainstream CDU/CSU conservatives in Germany's

election, with DAX futures now up 1.4% after a slow start. The

euro has added 0.5% to a one-month high at $1.0528, clearing the

previous top of $1.0514. The next target is $1.0534.

Conservative leader Friedrich Merz still has to form a

coalition government and it is not yet clear whether he will

need one or multiple partners, with the latter sure to take more

time. Analysts assume a straightforward coalition with the SPD

would be the most favoured outcome, but there's a lot of horse

trading to come first. The German Ifo survey due later could

show a pick-up in anticipation of a Merz win.

German leadership is sorely needed given question marks over

President Donald Trump's support for NATO and Ukraine. European

Union leaders are set to hold an extraordinary summit on March 6

to discuss additional support for Ukraine and how to pay for

Europe's newly burgeoning defence requirements. This will almost

certainly require more debt issuance and some relaxation of EU

budget rules. Maybe they could bring back War, sorry, Defence

Bonds to get patriotic retail investors involved.

Across the Atlantic, just the threat of tariffs was enough

to slam the services PMI sharply lower and it's likely to get

worse with reports the White House is actually pressuring Mexico

to raise its own tariffs on Chinese imports.

A jump in U.S. consumer inflation expectations to the

highest since 1995 will not be welcomed by Fed policy makers,

who have constantly comforted themselves with the assertion that

expectations were "well anchored". There are at least nine Fed

speakers this week so there's plenty of scope for verbal

warnings ahead of the PCE inflation report on Friday.

Wall Street futures have at least bounced in Asian trade,

perhaps on hopes Nvidia's ( NVDA ) results on Wednesday will

justify its stratospheric valuation.

Investors are looking for fourth-quarter sales around $38.5

billion and first-quarter guidance around $42.5 billion, while

any caution on future AI capex would be a downside risk.

Key developments that could influence markets on Monday:

- German Ifo survey of business for Feb, EU final CPI data

- BoE research conference where Deputy Governors Dave

Ramsden and Clare Lombardelli speak, along with Bank of Canada

Deputy Governor Toni Gravelle. BoE committee member Swati

Dhingra speaks.