Transparent selection overlay appeared, will not go away and persists through reboot and Mac reset

I have a Mac mini M4 that is a couple of weeks old.

Running macOS Sequoia 18.1.1.

When I plugged in a new mouse this overlay box appeared and it will not go away.

It does not appear in screenshots taken on the Mac, so I photographed the screen with my iPad.

It persists through reboot, is present if I start the Mac in diagnostic mode by pressing and holding the power button.

it persists even after wiping the Mac.

It persists even after restoring to an earlier Time Machine backup.

It is not being generated by the monitor, running the monitor self diagnostics stops it displaying when the monitor stops showing the video feed from the Mac.

I ran the Mac hardware diagnostics, but no issues were found.

I am at a loss as to what may be causing this, so I thought I would ask here.