European shares look set for some kind of a rebound this morning as rising futures for the leading benchmarks show investors are ready to buy at least some of yesterday's dip. On that note, Marko Kolanovic, chief global markets strategist at JP Morgan wrote yesterday that Wall Street's recent sell-off presents a buying opportunity.
Euro Stoxx 50, DAX, FTSE and IBEX 35 futures are up between 0.1% and 0.4% but on Wall Street, futures are still slightly in the red. Rising yields are indeed keeping the pressure on equity markets and investors still very much focused on Wednesday's US inflation data with the headline CPI seen climbing to 7% year-on-year.
The rest of today's data calendar is light with no further releases in the UK. In the US, the NFIB small business index for December is timelier. The November reading was up but only modestly so from October and was still the second lowest reading since Q1 2021. That report particularly noted that firms were struggling with labour shortages and as already released, results from December's survey shows a record number raised wages that remains an ongoing issue.
The sharp rise in bond yields, particularly in the US, in early 2022 appears to reflect concerns about how aggressively monetary policy will be tightened in response to the ongoing rise in inflation. Given that this week's Federal Reserve speakers may command close attention particularly as from this weekend Fed policymakers will go into their silent period ahead of their next policy update on Jan. 26.
Today’s speakers are three Regional Fed Presidents, Bullard, George and Mester, who will all vote on monetary policy this year and are all generally regarded as ‘hawks’. Markets will be looking for any hints from them on the potential timing of a first interest rate hike and when the Fed is likely to start running down its balance sheet.
Meanwhile, Fed policymakers Powell and Brainard will face a confirmation hearing before the Senate Banking Committee regarding Powell's reappointment as Fed Chair and Brainard's appointment as Vice-Chair. Both are likely to have the necessary support, but they may face some difficult questions including regarding the surge in inflation.
Early Wednesday, China’s CPI and PPI data for December are expected to show some easing in inflationary pressures. The consensus expectation is for annual inflation to have moderated on both measures. That may give the monetary authorities room to offer more support to the economy given concerns that growth may be slowing by more than expected.