Crypto News: 5 things to start your day: Europe

Good morning. UK store inflation falls, Renault scraps plans to list its EV unit, and the Bank of England examines the potential for systemic risk in private credit. Here's what people are talking about.

Inflation in UK stores fell to the lowest level in more than 18 months in another sign that the cost-of-living crisis is starting to ease. Shop prices were 2.9% higher year-on-year in January compared with a 4.3% annual increase in December, the British Retail Consortium said Tuesday. That's the lowest since May 2022 as retailers offered heavy discounts to attract shoppers.

Renault has scrapped plans to list its electric-vehicle business, reversing course due to a lack of appetite for share sales amid a slowdown in EV demand. The French maker of the Twingo and Megane E-Tech cited unfavorable market conditions and said its stronger cash generation eliminated the need for new funding of the EV and software entity, called Ampere.

The US will borrow $760 billion in the first quarter, the Treasury Department said Monday, less than many dealers expected in a move that supported bond prices. The figure is less than the $816 billion the Treasury said it expected to borrow for the period in a statement in October. Less anticipated issuance helped propel bonds higher following the announcement.

The Bank of England is examining the potential for systemic risk in the $1.6 trillion private credit market. The rapid growth of the sector means policymakers are exploring a number of potential issues, said Lee Foulger, the director of financial stability, strategy and risk at the BOE. In recent years investors and borrowers have increasingly turned to private credit as sharp rises in interest rates, alongside global conflicts and financial shocks, hit public markets hard.

European shares are on course to extend gains ahead of this week's Fed meeting. ECB board members Boris Vujcic and Philip Lane speak. French President Emmanuel Macron visits Sweden. EU defense ministers hold an informal meeting in Brussels, while the US-EU Trade and Technology Council convenes in Washington. Expected data include euro-area GDP and consumer confidence. Earnings season continues as Diageo, BBVA and Kesko report.

MLIV Pulse: The resilience of the American consumer helped the US avoid the recession. What's the outlook for this year? Will Americans wine, dine and travel, including overseas, helping boost the global economy? Share your views in the latest MLIV Pulse survey.

This is what's caught our eye over the past 24 hours:

Amazon drops iRobot deal; Roomba maker cuts 31% of staff.
Labour drafts plan to better meet firms' UK investment needs.
Musk says first Neuralink patient received implant in brain.
How a billionaire Sultan ascended to Malaysia's throne.
Housing affordability near record low hits black buyers hard.
Here's what China is doing to boost economy, rescue markets.
Evergrande liquidation is a big test for international creditors.

For all of Europe's challenges — lackluster growth, inflation worries and geopolitical concerns — it sure is looking pretty relaxed.

Check out the European Central Bank's systemic stress indicator, which gauges financial stress from a number of measures such as equity, bond and currency markets; financial intermediaries; and money markets. That's near the lowest level since the end of 2021, well before policymakers deployed 450 basis points of rate hikes:

It's a bit of a head-scratcher in some ways, given expectations for fourth-quarter growth data due later to show the economy contracted for a second straight period — a technical recession, by some definitions. That's probably why traders have piled on bets for the ECB to start cutting rates as early as April even as President Christine Lagarde affirmed, however halfheartedly, that a summer reduction may be more likely.

Yet as Maeva Cousin from Bloomberg Economics points out, the euro area is "struggling but isn't collapsing," with the labor market staying resilient and inflation easing gradually. Signs of improvement in household and business credit, with the drag on spending from credit provision easing slightly in December, also lend support to this view.

Ultimately, while its growth is considerably slower, the euro area is enjoying a version of the soft landing narrative playing out in the US. That buys the ECB just a bit more time to weigh options for a rate cut later rather than sooner, which risks disappointment for traders banking on a spring move.

Kristine Aquino is managing editor for Bloomberg Markets Today. Follow her on X at @krisaqnews.