Sujata Ro shows us the future.

Ouch. Despite all central bank promises about an inflation spike that is temporary, investors have difficulty seeing past the largest annual increase in U.S. inflation in 31 years.

Ten-year yields on inflation-protected Treasuries fell to -1.2% due to a massive demand.

This is roughly 70 basis points lower than the peak of this year.

The 1% surge Wednesday and the 11-bps jump in nominal Treasury yields was followed by Japanese data today showing that wholesale inflation is at its highest level for 40 years. Wall Street was not surprised to see a 1.7% drop in the Nasdaq. This is despite tech stocks being sensitive longer-term yields.

After the 0.7% plunge the day before, world stocks are now stable. This is supported by the news that Evergrande, a Chinese developer, had redeemed his bond coupons and avoided default for the third consecutive month. Prices for the bonds concerned have increased by around half cent.

Money markets bet that central banks will become more aggressive in the next year. The first Fed rate increases and the first ECB rate hikes can now be seen in September and July respectively. However, shares are currently supported by the extremely negative “real” rates.

On an inflation-adjusted basis, 10-year U.S. yields plunged to a new record low below -1.2%, keeping alive the there-is-no-alternative (TINA) narrative.

After this year’s largest IPO, Cue has hit new records and Rivian, an Amazon-backed EV company, is valued at $100 Billion.

The inflation picture is alarming!

Inflation indicators for the future may provide some reassurance. Breakevens for the expected inflation over the next ten years are 2.7%, while breakevens for the 5-year period is 3%. Although this figure is higher than the Fed’s target of 6.2%, it is still not enough.

European shares open weaker. However, companies from many sectors, including Burberry, Siemens and Arcelor Mittal as well Delivery Hero and Generali (MI :), continue to report positive quarter-end earnings.

The economy in Britain grew by 0.6% last September, but that is not enough to cheer them up. The economy is still smaller than it was in February 2020.

These are the key developments expected to give more direction for markets Thursday

-Swiss National Bank governing board members Andréa Maechler and Thomas Moser speak 1730 GMT

Emerging markets: South Africa’s budget is 1200 GMT. Mexico and Peru central banks are expected to increase interest rates

U.S. markets close