Julien Ponthus gives a glimpse at the future from Julien Ponthus.

“We will need to be humble, but also a little nimble.”

While it is hard to predict when the rate increase lift-off will occur, the Federal Reserve Chair Jerome Powell gave investors enough information at yesterday’s congressional hearing that they were happy enough to buy the Wall Street plunge.

This positive sentiment was helped by Bank of Japan’s most optimistic outlook on the country’s region economy in over eight years. It spread to other asset types with commodities and oil moving higher, while the dollar fell six weeks and Asian bourses prospered.

Importantly, after the Nasdaq positive close, tech stocks made a 4 percent jump in Hong Kong, suggesting that stock-pickers have not yet written off the sector.

The year’s first day of trading had revealed early problems in its cycle. Volatility was a problem for tech shares. Investors are often reluctant to pay high premiums for higher interest rates.

While some traders are comfortable with increasing bond yields and gently dipping into the relative appeal of stocks there is still some concern about how tightening will affect markets.

While today’s Chinese factory gate prices and the consumer inflation rise more slowly than anticipated in December were a relief, there is another test that will be required to confirm today’s smooth tightening cycle story.

In addition to German wholesale inflation, U.S. December consumer inflation data will be published with the expected headline CPI of 7% year on year.

As amazing as this may sound, the current reading appears to have been priced in. Expectations are that inflation will gradually rise as we get further into 2022.

The benchmark U.S. 10-year yields on U.S. bonds have slightly declined from Monday’s 1.808%, which was the highest level since January 2020.

The European Central Bank has not yet raised rates and is unlikely to do so in the near future. However, the German bond yields remain low.

On Wednesday, key developments should give more direction to the markets:

Sergei Ryabkov, Russian Deputy Foreign Ministry and -NATO Ambassadors meet

Andrea Enria, ECB Board member and Neel Kashkari, Fed Minneapolis President speak

Poland Central Bank: Emerging Markets

-US 10-year note auction Graphic: Fed and ECB policy rate history, https://fingfx.thomsonreuters.com/gfx/mkt/dwvkrkjkkpm/Two.PNG