Sujata Ro shows us a glimpse at what lies ahead for the markets today

JPMorgan’s (NYSE:) survey revealed that 86% percent of their clients intended to seek equity exposure. The future of these plans is uncertain after recent commodity price increases and mounting inflation expectations.

Central banks are being warned by the bank that they have to make a choice between energy-driven inflation and economic growth.

Alarmingly, the five-year Treasury “breakevens” rose to 3.5% on the heels Federal Reserve’s interest rates liftoff and the money markets pricing in excess of 200 basis points more increases.

Therefore, breakevens (essentially the view of bond markets about where inflation will be five years from now) have moved higher in response to Fed policy tightening signals. Although five-year inflation swaps are a better gauge than the Fed’s target, they still exceed 2.3%.

Jerome Powell, Fed chief, came out swinging Monday with the promise of 50bps moves if necessary. The Fed has now set a target of 3% for the Fed funds rate in Sept. 2023. This is compared with a 1.1% price at the beginning March.

The Fed and the other central banks will likely act quickly to stop inflation, which they see as accelerating away.

The feeling that inflation is out of control can be felt by emerging market central banks. Hungary has been instructed to increase rates on Tuesday by 100 bps. Brazil raised rates by nearly 10 percentage points in this cycle, and it continues signalling further.

Wall Street futures fell Monday, but Europe’s is up. Oil is now at almost $120 per barrel. Listen out for Fed and ECB speakers in the later part of the day.

Markets should be more informed by key developments on Tuesday

Alibaba increases buyback program to $25 Billion

Kuroda, BOJ renews his powerful pledge of easing

-ECB speakers: board member Fabio Panetta, Vice President Luis de Guindos, Chief Economist Philip Lane

-Fed Speakers: New York President John Williams and Cleveland President Loretta Medster. San Francisco Fed’s Mary Daly

Philadelphia Issues Nonmanufacturing Outlook Survey

-Hungary to deliver 100 bps rate rise

Graphic: Inflation: https://fingfx.thomsonreuters.com/gfx/mkt/klvykjkzgvg/Pasted%20image%201647936128472.png