European stock markets have eased back slightly having soared yesterday in response to figures showing that the rate of inflation in the US continues to ease.
At an annual pace of just over 7%, it was the lowest inflation print in the US since December last year.
Official figures from the UK this morning also showed the annual rate of consumer price increases easing back, but it remains above 10%.
Investors are poised for further interest rate increases from the US Federal Reserve tonight and the European Central Bank tomorrow.
Both are expected to raise rates by 50 basis points (0.5%).
"The Fed might not have to take rates to 5% or higher and that is surprising news for stock traders," Edward Moya, Senior Market Analyst for the Americas with Oanada said in response to yesterday's stock market moves.
"Fed tightening is looking like it will just need a half-point increase [tonight] and a 25bp (0.25%) increase in February," he said.
Peter Brown, of Baggot investment Partners, said he expected the US Fed to opt for two quarter point rises next year and he said the ECB was likely to keep on raising interest rates into next year.
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"They're going to raise rate by half a percent at least tomorrow. That would bring rates to 2%. Certainly, we're looking at 3.5% to 4%. That would be a normal interest rate with low inflation where depositors have something to put their money into and loan rates aren't too high," he explained.
"If you're at 3.5% and inflation is at 9%, that's not going to fight inflation," he added.
Mr Brown said he expected further stock market declines next year following a recent rally.
It comes at the end of a year that saw indexes going from all time highs to bear market territory - defined as a correction of more than 20%.
"Picks stocks that have low debt and pay a dividend. That's winning. The standard 50-50 portfolio of US stocks and Western European bonds is in trouble again next year, I think," he concluded.
