A look at the day ahead from Dhara Ranasinghe.
It doesn't seem to matter where you look these days, that long asleep beast - inflation - is clearly wide awake.
Data on Thursday showed China's factory gate prices grew at their fastest pace on record in September, a day after figures showed another solid increase in U.S. consumer prices.The take away from markets is that transitory or not, central banks are likely to respond to higher inflation sooner rather than later.
And with minutes from last month's Federal Reserve meeting showing policymakers' growing concern about inflation, investors have again brought forward rate-hike expectations.Fed Funds futures have pulled forward expectations for the first hike from late in 2022 to almost fully price a 25 basis point hike by September.
In addition, money market pricing suggests the Bank of England could move before year-end, the cautious European Central Bank could tighten next year and the overtly dovish Reserve Bank of Australia could raise rates by end-2023 -- a trajectory that doesn't gel with the central bank's guidance. Singapore's central bank on Thursday unexpectedly tightened monetary policy, citing forecasts for higher inflation.Markets, having priced in higher inflation and a tighter monetary policy outlook, appear to be in a calmer mood in early Europe. Asian shares rallied overnight, European and U.S. stock futures are higher too. U.S. Treasury yields, while a touch higher, are holding below recent multi-month highs.
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