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

Investors will get another chance to see if the global disinflation story gains more traction with UK inflation data taking centre stage on Wednesday. Its outcome though may not significantly affect the Bank of England's policy review the day after.

Headline inflation in May is expected to be 2% year over year - back to the BoE's target - after April's 2.3%, with the easing in prices a result of household energy bills easing.

But the central bank is widely expected to stand pat on rates as policymakers focus on wage growth and service sector inflation, which is estimated to come in at 5.5% in May.

Data last week showed British wages picked up more quickly than forecast, keeping the pressure on the central bank to keep rates higher for longer.

The inflation reading and the consequent policy decision will provide investors with some clarity ahead of Britain's general elections in July, with the blue-chip FTSE 100 sliding 3% since hitting a record high in May.

Markets may be feeling a sense of deja vu.

After all, it was just last week when mild U.S. inflation readings came in hours before an overall hawkish stance by Federal Reserve officials, who cut their median projection for three quarter-point rate cuts to just one for the year.

With U.S. markets closed, trading may be subdued throughout the day.

Sterling remains muted and was last at $1.2711, while the dollar wobbled after retail sales data on Tuesday indicated signs of exhaustion among U.S. consumers.

The data slightly pushed up expectations of a rate cut in September, although with the Fed being so data dependent those expectations will be volatile in the near term. At the start of the year, traders had priced in as much as 160 basis points of cuts in 2024, but now anticipate 48 bps of easing.

No such worries for Nvidia as the AI darling dethroned tech heavyweight Microsoft to become the world's most valuable company at $3.335 trillion.

The rally in technology stocks continued into Asia taking regional stocks higher, with tech-focused Taiwan stocks scaling yet another record high, while South Korean stocks touched their strongest since January 2022.

Key developments that could influence markets on Wednesday:

Economic events: UK May inflation report, UK PPI data for May