(Reuters) – A look at the day ahead in European and global markets from Wayne Cole.

Asian markets had thought to bask in the glow from Wednesday’s radiant PMI data from China, and the region in general. Taiwan, Thailand and Vietnam all enjoyed a pick-up in activity, while JPMorgan’s global manufacturing PMI rose nearly 2 points to an eight-month high of 50.8.

The hopeful mood, however, could not survive Elon Musk’s “Master Plan”. Seems his three-hour YouTube live stream was big on robots and saving the planet but short on new vehicles, specifically a much-awaited small and affordable EV.

Tesla’s shares duly sank 5.6% after the bell, erasing around $36 billion in market worth, and dragging Nasdaq futures down 0.5% in Asian hours.

Adding insult to injury was a further tick up in 10-year Treasury yields to a four-month top of 4.018%, while two-year yields reached their highest since 2007 at 4.921%.

Investors are still smarting from a spike in the prices paid component of the ISM manufacturing survey to 51.3, the highest in five months and well above its December trough of 39.4.

That saw Fed funds shift to price in a near one-in-three chance the Federal Reserve could hike rates by 50 basis points on March 22. Markets are now leaning toward a peak of 5.50%-5.75%, compared with 5.0% just a month ago.

Futures have also now taken more than 100 basis points of rate cuts out of 2024, a remarkable turnaround for one month.

And they are hardly alone. Back in mid-January, Euribor futures had implied ECB rates would end 2024 at 2.4%. Now it’s 3.4%. Markets are fully priced for a 50bp hike on March 16, with even a non-trivial chance of 75bp, and are flirting with another 50bp in May.

That leaves a lot riding on what EU (HICP) inflation figures for February show later on Thursday. Median forecasts are for an annual figure of 8.2%, but risks are on the upside following the surprises from France, Spain and Germany.

There’s even talk of 8.5% or more, a result that would really shake the world of bonds.

Key developments that could influence markets on Thursday:

– ECB President Christine Lagarde participates in Spanish television interview on inflation and rates at 0755 GMT

– Bank of England chief economist Huw Pill speaks on the economic outlook at 1500 GMT

– EU flash inflation and unemployment data, along with minutes of the ECB’s latest policy meeting

– Fed Board Governor Christopher Waller and Fed Bank of Minneapolis President Neel Kashkari speaks, with the market likely to pay particular attention to the former

– U.S. Data on weekly jobless claims and auto sales, with a risk the latter might show a pullback after a bumper January

(By Wayne Cole; Editing by Edmund Klamann)

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