One way or another, Wednesday's U.S. July inflation print could prove key for markets torn between strong data that suggests the time for withdrawing stimulus is nearing and concern that a resurgent delta COVID variant could stall growth.

For two months, markets have largely ignored strong inflation prints, buying into the Fed's mantra that a pick-up in price pressures is temporary. So what's different this time?

Well for starters, Friday's stronger-than-expected U.S. jobs data has reignited talk that an improving jobs market will encourage the Fed to start tapering soon. Note, the Fed's Raphael Bostic said this week he would only need to see one or two more job reports like July to vote for tapering.

And Tuesday's passing of a $1 trillion infrastructure bill in the Democrat-controlled U.S. Senate is a reminder that upward pressure on prices could be sustained for longer than anticipated.

Having pushed Treasury yields down (and prices up) for four straight months, bond investors are clearly uneasy: 10-year bond yields are up 20 basis points from last week's six-month lows.

Economists polled by Reuters estimate U.S. inflation rose 5.3% in the 12 months through July, versus 5.4% in June.

Given that talk of a Fed taper is usually followed by the word 'tantrum', it remains to be seen if today's number brings relief or panic.

As markets await the release, the dollar is on firm ground, world stocks are trading sideways, European and U.S. stock futures are flat.

In corporate news, high materials prices and demand from the car sector helped Thyssenkrupp swing to an quarterly operating profit. And Dutch bank ABN Amro is to resume dividend payments thanks to a strong bounce in net profit.

Key developments that should provide more direction to markets on Wednesday:

- Lenovo Q1 profit more than doubles to beat expectations, shares jump

- NortonLifeLock agrees to buy Avast for up to $8.6 bln

- German HICP final inflation

- Federal Reserve Bank of Kansas City President Esther

- George, Atlanta Fed's Rafael Bostic speaks

- U.S. auctions: 10-year Treasuries, Germany auctions Bunds

- US Earnings: Wendy's, e-Bay

- European earnings: Dialog Semiconductor, Ahold, E.ON, Vestas, Deliveroo

Graphic: CPI has jumped in recent months

(Reporting by Dhara Ranasinghe; editing by Sujata Rao)