Dec 2 - Welcome to the home for real-time coverage of markets brought to you by Reuters reporters. You can share your thoughts with us at markets.research@thomsonreuters.com 15% U.S. INFLATION: HOW OUTRAGEOUS IS THAT? (1210 GMT) While the outlook for 2022 is murky as ever, courtesy of the Omicron variant, there"s a few things at least that got clarified in the final weeks of 2021. First and foremost, the "transitory inflation" narrative has been officially ditched by the Fed and there"s a clear consensus that rising prices are now a key threat for next year, as was highlighted by the OECD yesterday. Consumer price in the euro zone accelerated to 4.9% in November, by far the highest level in last 25 years and the Fed"s preferred inflation measure surged by the most in nearly 31 years on an annual basis in October. Question is, how worst can it get? Well, according to Saxo Bank"s yearly "Outrageous Predictions" research note which just came out, U.S. inflation could spiral to 15% in 2022 fuelled by surging wages. Now, of course, Saxo Bank stresses that its "Outrageous Predictions" are by no means a forecast of what"s to come but rather a deep dive in "known unknowns" or whatever could constitute a black swan for financial markets. Still, we asked Steen Jakobsen, Chief Economist and CIO at Saxo Bank how outrageous a prediction of U.S. inflation reaching 15% really is. "It"s not that outrageous", he told us, pointing out at to a possible energy crisis this winter combined with supply chain issues, rising rents and crucially, wages going through the roof. The 15% figure is based on the assumption that every inflation cycle tends to go above its past historic peak so in this case, 15% would be just above that of the early 80s. For Jakobsen, the swift shift in the Fed"s stance on inflation reflects the realisation that main street in America is about to feel the pain of rising prices biting into their purchasing power with all the political consequences it might entail. And what would 15% inflation mean for investors? "Stagflation is the immediate answer", says Jakobsen, who sees potential for a 25% correction in U.S. stock markets in that scenario. Anyhow, Saxo"s other "Outrageous Predictions" include: * The plan to end fossil fuels gets a rain check * Facebook faceplants on youth exodus * The US mid-term election brings constitutional crisis * EU Superfund for climate, energy and defence announced, to be funded by private pensions * Women’s Reddit Army takes on the corporate patriarchy *India joins the Gulf Cooperation Council as a non-voting member * Spotify disrupted due to NFT-based digital rights platform * New hypersonic tech drives space race and new cold war * Medical breakthrough extends average life expectancy 25 years (Julien Ponthus) ***** STILL WORRIED ABOUT A HAWKISH ECB IN DECEMBER? (1031 GMT) In the bond market it’s not all about the Federal Reserve, which might have decided to stop baby-sitting financial markets, as some analysts worry about a more hawkish stance from the ECB in December despite the Omicron variant. “The Bund yield in the five-year maturity bucket - customarily the segment of the curve which reacts most strongly to news or expectations about the ECB’s asset-purchase programmes - kicked up by anything up to 7 bps in the wake of the latest sets of inflation data,”DZ bank analysts say. German consumer price inflation rose 6.0% year-on-year in November, the highest rate recorded since January 1997, when the EU-harmonised series began. read more “The market continues to be concerned about how the ECB Governing Council is going to recalibrate its policy - which will affect the pandemic emergency purchasing programme PEPP as well - in two weeks,” DZ Bank analysts add, also mentioning news about a possible delay. Sources said that a growing number of European Central Bank governors are considering delaying part of a decision on the ECB"s stimulus plans as the outlook has been muddied by a new coronavirus variant and mounting price pressures. read more (Stefano Rebaudo) ***** SWITCHING BACK TO RISK-OFF (0840 GMT) Equity markets have entered a roller-coaster pattern and the uncertainty over the Omicron variant has scaled up volatility, keeping benchmarks moving between sell-offs and bounce backs. Today is no exception and in Europe we"re switching back to plain risk-off after gains yesterday. The STOXX 600 is down more than 1%, no sector is trading in the black, and 88% of the pan-European index"s constituents are posting losses. In this environment company newsflow is having negligible impact on stocks. Among the few exceptions is Vifor (VIFN.S) which has shot up by 12% on reports Australian biotech group CSL is in talks to buy the Zurich-listed firm. Here"s your opening snapshot:VOL TAKES A TOLL (0806 GMT) COVID fears, the approach of year-end and the Fed signalling policy tightening -- it"s a recipe for turbulence and that"s what we are seeing. The VIX, an equity volatility index dubbed Wall Street"s fear gauge, has soared above 30%, double the placid levels of mid-November (.VIX). The discovery of a single U.S. Omicron case turned Wall Street traders" screens red, quickly reversing what had been a buoyant session following a record stock market close in Europe (.STOXX). read more Sentiment in the investor community, keen protect any year-to-date portfolio gains, is clearly turning on a dime. Bond and currency volatility too have spiralled to the highest since last March and December respectively, (.MOVE), . On Thursday, Asia picked up the selloff baton from New York and the downtrend continues into Europe. U.S. futures though signal a higher open, at least for now. Listen out for a raft of Fed speakers -- their last airing before the pre-meeting quiet period. The hawkish messages are loud and clear; Cleveland Fed boss Loretta Mester -- a voting Fed member next year -- reckons the bank should be able to squeeze in a couple of rate hikes next year. More money poured into Treasuries, with 10-year yields now down more than 20 basis points from a week ago . Over in Europe, German 10-year yields are close to 2-1/2 month lows touched recently . For signs of stress, also watch Italy, whose bond yield premium over Germany this week has gaped wider and is at the highest since last October. Finally, oil remains on shaky ground amid the Omicron worries and travel curbs. An OPEC+ meeting later in the day will decide whether to proceed with the monthly output increase or to curb supply read more . Vol hasn"t bypassed oil markets either -- Brent futures jumped $20 from August though October, fell almost $10 by mid-November and are down a further $10 since then .Key developments that should provide more direction to markets on Thursday: -Euro zone PPI/unemployment -ECB speakers: ECB Board Member Fabio Panetta -Fed speakers: San Francisco President Mary Daly , Richmond President Thomas Barkin, Altanta President Raphael Bostic -Emerging markets: Brazil Q3 GDP, India trade balance -U.S. initial jobless claims (Sujata Rao) ***** EUROPE: A DOWN DAY AHEAD (0736 GMT) Omicron has reached the U.S. and the late sell-off seen on Wall Street overnight is set to sour the mood at the open here in Europe following yesterday"s bounce from 7-week lows. Clearly volatility is here to stay until there is more clarity on risks associated with the new virus variant. So while European stock futures are falling around 1%, U.S. indexes look set for a mild rebound later on. (Danilo Masoni)