GLOBAL MARKETS-Wall Street set to open lower; U.S. inflation in focus

* Graphic: Global asset performance http://tmsnrt.rs/2yaDPgn
* Graphic: World FX rates http://tmsnrt.rs/2egbfVh
* Reuters Live Markets blog: LIVE/

(Updates prices, adds detail, comment and chart)
By Elizabeth Howcroft
LONDON, Jan 13 (Reuters) - European shares were mixed on
Wednesday and the dollar rebounded, while the 10-year U.S.
Treasury stabilised below its 10-month high as markets focused
on U.S. inflation data.
After Asian equities saw modest gains, European shares
opened lower and struggled to make gains, with the pan-European
STOXX 600 up 0.1% on the day at 1156 GMT .STOXX , but London's
FTSE 100 and Germany's DAX marginally in the red .FTSE
.GDAXI .
The MSCI world equity index .MIWD00000PUS , which tracks
shares in 49 countries, was up 0.1%, edging back towards record
highs, but MSCI's main European Index .MSER was down by a
similar amount.
Wall Street futures were also in the red, with S&P 500
e-minis down 0.1% ESc1 . "Inflation is the key number for us to watch today," said
Marija Veitmane, senior multi-asset strategist at State Street
Global Markets.
"The market is very relaxed about it and should we get high
inflation that would be a big pressure. The 10-year is probably
the key variable to watch."
"If you have a very strong positive surprise then you will
probably start thinking about the Fed being a bit more
aggressive in their intervention and pushing yields lower," she
said.
At the same time, investors are tracking the discussion
around tapering - that is, the Federal Reserve's possible easing
of monetary stimulus.
Several Fed policymakers, including Loretta Mester, Esther
George, James Bullard and Eric Rosengren, pushed back against
the idea of the Fed tapering its asset purchases any time soon.
These comments, along with a well-received auction of
10-year Treasuries, pushed the U.S. 10-year yield down from the
10-month high of 1.187% reached in the previous session.
At 1200 GMT, the benchmark yield was at 1.1274% US10YT=RR .
The yield curve US2US10=TWEB , which had reached the
steepest since May 2017 on expectations for big fiscal stimulus
under a new Democratic administration, narrowed overnight but
started to creep up in the European session, at 97.5 basis
points.
"We believe the potential for fiscal stimulus, along with a
normalization of economic activity as the vaccine rollout ramps
up, justify slightly higher US Treasury yields," UBS strategists
wrote in a note to clients.
"To acknowledge this, we have raised our 10- and 30- year US
Treasury yield forecasts by 0.1 percentage points this year to
1.0% and 1.7%, respectively, by end-December," they said. They
do not expect the run-up in yields to go much further than that,
because central banks remain accommodative and the Fed has
signalled a tolerance for higher inflation.
U.S. December inflation data is due at 1330 GMT.
The U.S. dollar recently broke its downward trend with a
three-day winning streak, then resumed falling on Tuesday. It
was steady overnight but rose again on Wednesday. At 1204 GMT,
it was up 0.3% at 90.285 versus a basket of currencies =USD .
In Europe, November industrial production data was better
than expected. European Central Bank President Christine Lagarde pushed
back about economic pessimism, saying that the ECB's December
projections for a rebound are "still very clearly plausible", so
long as COVID-19 restrictions in Europe can be lifted from the
second quarter of the year. Euro zone government bond yields dipped. Italian bonds,
which sold off on Tuesday due to political uncertainty, lagged
behind Germany. Versus the dollar, the euro was down around 0.3% at $1.21675
at 1209 GMT EUR=EBS . Riskier currencies such as the Australian
and New Zealand dollars also fell as the U.S. dollar
strengthened NZD=D3 AUD=D3 .
Bitcoin edged up, but at $34,255 was still around 18% down
from the record high of $42,000 it reached on Friday last week
BTC=BTSP .
Oil prices steadied after an early jump when industry data
showed a bigger-than-expected drop in inventories and investors
shrugged off the impact of the pandemic. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Emerging markets http://tmsnrt.rs/2ihRugV
Global asset performance http://tmsnrt.rs/2yaDPgn
US10 https://tmsnrt.rs/2LKSb2K
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