Saikat Chatterjee gives a glimpse at what lies ahead.

There’s no respite for global policymakers from the dreaded “I” word. Although they may have spent most of the past two weeks repeating their belief in high inflation being temporary, markets are still wary about buying into this message.

Given the recent data, it isn’t surprising. According to the latest data, Chinese factory gate prices rose at the fastest pace in 25 years, following Tuesday’s strong production inflation reading in America.

Next, add in the fourth day of high oil prices at $85/barrel.

Wall Street closed in the red Tuesday due to a widening gap between economic data and policymakers’ mantras, ending an 8-session streak of record closing highs.

Even though a number of company forecasts have been beat, the Q3 earnings season saw 81% of names surpass estimates. However, European and U.S. stock markets are heading south today.

Investors are racing to grab inflation-linked bonds as they feel more nervous about price pressures. Actual, inflation-linked bond yields, also known as “real”, are currently below 1.1% in the United States and below 2.0% in Germany. They are below 3.2% in Britain.

Then there are swirling concerns about China’s cash-strapped Evergrande’s ability to make an offshore bond payment before a Wednesday deadline, and what you have is Wall Street’s “fear gauge”, the at a one-month high.

Safe-haven Japanese currency yen is also attracting bids, taking dollar below 112yen for a month.

A new test is coming. A Reuters survey of economists predicts that the U.S. consumer prices index will be released later Wednesday at 4.3% annually, compared to the Fed’s 2% average inflation target.

On Wednesday, key developments should give more direction to the markets:

-Macro corner: German CPI, Italian industrial production, U.S. initial jobless claims.

Japan’s manufacturers feel down 7 months.

After an unexpected 2.3% gain in Q3 net profit, -Allianz improves its full-year outlook

Due to higher retail revenues and lower bad loan provisions, Credit Agricole Q3 profit surpasses expectations

China’s Fantasia Holdings developer shares plunged by 50%, after the company said it could not guarantee that it will be able to meet its debt obligations.