By Peter Nurse

Investing.com - European stock markets are expected to open higher Wednesday ahead of key Eurozone inflation data, but sentiment remains fragile amid uncertainty over China’s COVID policies.

At 02:00 ET (07:00 GMT), the DAX futures contract in Germany traded 0.5% higher, CAC 40 futures in France climbed 0.5% and the FTSE 100 futures contract in the U.K. rose 0.4%.

European markets received a boost Tuesday after inflation numbers out of Germany and Spain both fell short of expectations, suggesting that the Eurozone as a whole had taken a big step closer to peak inflation.

The European Central Bank has started an aggressive interest rate hiking cycle in order to combat record-high consumer prices, raising its key rates by 2 percentage points over its last three meetings.

However, these figures hinted at an earlier and lower end to this year's surge in inflation, and thus a quicker end to the ECB's hiking cycle.

European Central Bank President Christine Lagarde warned on Monday that she doesn’t think inflation has peaked yet, and thus Wednesday’s focus will be on the Eurozone CPI release for November.

This is expected to come in at 10.4% on an annual basis, down from 10.6% the prior month, but there is now clear downside potential.

Elsewhere, investors will keep a wary eye on events in China after gains on Tuesday on rumors that Beijing planned to scale back its zero-COVID policy after civil unrest, even though the government has yet to confirm this intention.

Data released earlier Wednesday showed that Chinese business activity shrank further in November, highlighting the continued economic toll of its strict COVID-related mobility restrictions.

Federal Reserve chairman Jerome Powell is also scheduled to speak later Wednesday, and his comments will be carefully studied for more cues on future U.S. monetary policy.

Crude oil prices rose Wednesday, boosted by an industry report showing falling U.S. crude inventories, although caution ahead of the weekend’s OPEC+ meeting limited gains.

Data from the American Petroleum Institute, released Tuesday, showed that U.S. crude stocks shrank by a much bigger-than-expected 7.9 million in the past week, suggesting that the U.S. government has likely scaled back its drawdowns from the Strategic Petroleum Reserve.

If confirmed by the official government release later Wednesday, this would point to tighter supply conditions in the U.S., the world’s largest consumer of crude.

However, these gains have been tempered by a Reuters report stating that the Organization of the Petroleum Exporting Countries and allies, known as OPEC+, is likely to keep oil output policy unchanged at a meeting on Sunday.