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Take a look: Five world markets themes in the coming week

Following are five big themes likely to dominate thinking of investors and traders in the coming week and the Reuters stories related to them.

By: | London | Published: September 16, 2016 10:14 PM
The sharp sell-off in stocks and bonds on worries that the flood of central bank cash that has lifted assets prices across the globe in recent years may have crested has calmed somewhat but those concerns have not gone away. (Reuters) The sharp sell-off in stocks and bonds on worries that the flood of central bank cash that has lifted assets prices across the globe in recent years may have crested has calmed somewhat but those concerns have not gone away. (Reuters)

Following are five big themes likely to dominate thinking of investors and traders in the coming week and the Reuters stories related to them.

CLOSER

The sharp sell-off in stocks and bonds on worries that the flood of central bank cash that has lifted assets prices across the globe in recent years may have crested has calmed somewhat but those concerns have not gone away. U.S. Federal Reserve and Bank of Japan policy meetings in the coming week will see to that. Already slim expectations the Fed would raise rates on Wednesday diminished further after some tepid retail sales and factory activity data. But there is a clear sense in markets that a hike is coming sooner or later and economists polled by Reuters see a 70 percent of rates going up in December. Reports the BOJ will make negative interest rates, rather than base money, the centrepiece of future monetary policy also spooked investors, as this would signal the central bank’s massive economic stimulus effort — a key plank of Prime Minister Shinzo Abe’s “Abenomics” scheme to lift the Japanese economy — is close to its limits.

* POLL-December Fed rate hike probability 70 percent, say economists

* U.S. retail sales, factory output slump; Q3 forecast cut

* BOJ to make negative rates centrepiece of future easing – sources

* Fed, BOJ, New Zealand rate decisions Sept. 21, Norway Sept. 22

BOND MARKET BLUES

It’s proving to be a tumultuous month for bonds as investors question whether ultra-easy monetary policy and low interest rates are losing their punch. A sell-off in fixed income has revived memories of last year’s “flash crash” in German bonds and the 2013 “taper tantrum,” with yields curves in the U.S., Japan and Europe at their steepest in months. For some, the volatility is unlikely to snowball and creates a buying opportunity for yield-starved investors. German Bund yields, which turned positive a week ago, were back in negative territory on Friday. For others, caution is warranted amid signs that monetary stimulus is reaching its limits — a debate that next week’s Fed and BOJ meetings could shed more light on.

* Global bond yields to rise as investors see fiscal expansion on horizon – Gundlach

* Central bank buying threatens Germany’s benchmark bond status

* BREAKINGVIEWS-Global bond rout gives Draghi a reprieve

* Bonds may be choppy but it’s not repeat of Bund ‘flash crash’

DEADLOCK ALL ROUND?

Major currency markets have been far less moved than bonds by the changes in market thinking about central bank policymaking over the past two weeks but there is a lot of doubt about how the rest of the year will play out for the dollar, the euro and yen. Any attempt by the Fed to lay the groundwork for a December move should, in theory, support the dollar. But it would also likely add to the “risk-off” tone in markets; the greenback should be a safe haven if there is another crunch on overinflated asset prices, but especially given the policy outlook probably not in relation to the yen and possibly not the euro. So how are the Japanese authorities to keep their currency down if the Fed raise rates without sending a wave of money into the yen?

* INTERVIEW-Talk of ECB policy change about increments, not direction

* A light in the bond shake-out gloom: steeper yield curves

* Global foreign exchange report

STILL CUTTING

While investors may be fretting about dwindling ammunition at the world’s big central banks, there are no such worries in Turkey where its central bank meets on Thursday. The bank is expected to stay firmly in interest rate-cutting mode and any signal that it is willing to tolerate high inflation going into next year is likely to drive up bets on lira weakness and spur on the bond and stock market bulls.

* Turkish growth slows to 3.1 pct in second qtr, below forecast

* Turkish government keeps up pressure for lower interest rates

* Turkish consumer prices fall in August, rate cuts may follow

* Hungary rate decision Sept. 20, Paraguay Sept. 21, Indonesia, Philippines Sept. 22

PMI OUTLOOK

Markets get their monthly snapshot of business activity in the coming week in the shape of flash purchasing manager index data for September. In the euro zone German manufacturing is expected to have slipped compared with last month while the service sector picked up, according to economists polled by Reuters. In France, the opposite happened, though the French manufacturing PMI is forecast to still be contracting.

* German exports add to growth concerns with “crash landing”

* Italy to cut growth forecasts, economy minister says

* French growth seen picking up, but little room for big tax cuts

* German data calendar, France, euro zone

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