Morning Bid: Lagarde takes the spotlight as oil sits above $100

A look at the day ahead in European and global markets from Ankur Banerjee

Investors are perhaps starting to realise that elevated bond yields and higher oil prices are the new normal as the Middle East war spreads ahead of central bank meetings where policymakers may struggle to quell markets' inflation angst.

The European Central Bank will kick off the central bank bonanza later in the day with a widely expected rate hike, with the Federal Reserve and the Bank of Japan due next week.

What comes next will be the prime focus as ECB President Christine Lagarde takes the stage in the wake of the biggest wave of attacks on shipping in the Middle East, where the over six-month long conflict is escalating again.

The euro was steady at $1.1637 ahead of the decision, while European stock futures pointed to a muted open.

Brent crude futures were perched above $100 a barrel for the first time since July, while long-term bond yields are at highs not seen since before the global financial crisis.

That toxic mix is weighing on sentiment with no end in sight for a war that is set to cast a shadow over U.S. midterm elections amid inflation worries.

Data on U.S. producer prices are due later on Thursday with consumer price inflation scheduled for Friday. Analysts expect the data to play a key role in whether the Fed hikes rates at its September 15 to 16 meeting. Fed funds futures traders are pricing in about 60% odds of a rate hike next week.

And what of the yen? It stands tall at 153.39 per dollar, up 4% this month, shrugging off the rise in oil prices as traders brace for a faster pace of rate hikes from the BOJ.

In a closely watched speech ahead of next week's policy meeting, board member Kazuyuki Masu warned of broadening price pressures that have pushed underlying inflation "very close" to its 2% target, hinting at rapid rate increases.

Key developments that could influence markets on Thursday:

Economic events: ECB policy meeting (A rate hike expected)

August inflation data for Germany

August U.S. PPI inflation

(By Ankur Banerjee in Singapore; Editing by Kim Coghill)