A look at the day ahead in markets from Tommy Wilkes.

If the European Central Bank’s inflation headache wasn’t bad enough, its first interest rate rise since 2011 will land on the day the government of its third-largest member state, Italy, fell apart. [nL8N2Z22RC].

Mario Draghi resigned as prime minister on Thursday after his coalition partners refused to heed his call for unity. Stocks have fallen and Italian borrowing costs climbed higher — a worry for an ECB desperate to contain market stress in its most indebted members.

The euro rose, however – helped by news Russian gas is flowing again through the Nord Stream pipeline after a 10-day maintenance shutdown.

Now investors are waiting for the bigger, if less dramatic, event of the day.

With sources this week said the ECB was weighing up a 50 basis-point rate increase rather than the 25 earlier flagged, a greater degree of uncertainty has crept into the meeting.

The other question is what detail the ECB might provide on a planned tool to contain bond market stress. Italy’s latest turmoil makes that task all the more urgent.

The ECB may look with some envy at the Bank of Japan which earlier on Thursday maintained ultra-low interest rates and signalled its resolve to remain an outlier in the policy-tightening wave.

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

Central bank meetings in Turkey, South Africa

U.S. earnings: Blackstone, Dow Chemical Co, Freeport-McMoRan Copper & Gold, AT&T, Philip Morris International, Travelers Companies Inc, American Airlines, Twitter, Mattel 

EU earnings: Ocado, SAP, Dassault  

U.S. Initial Jobless Claims/Philly Fed business index

(Reporting by Tommy Wilkes; Editing by Sujata Rao)