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.

1/ STUCK?

Federal Reserve Chair Janet Yellen may have sounded pretty hawkish on the likelihood of a rate hike this year, but given the concern over China, other emerging markets and weak commodity prices, it may not be that easy to pull the trigger. U.S. jobs data due at the end of the week will, as ever, be closely watched. Numerous Fed officials are out and about as well, giving their take on the rate outlook. The Bank of Japan and European Central Bank, meanwhile, look set for further policy easing. Euro zone flash inflation for September is not expected to make happy reading for the architects of ECB QE.

* Fed delay could spur more debt issues to fund share buybacks

* BREAKINGVIEWS-Don’t panic: Fed’s rate hikes will be slowest ever [ID:nL1N11V0S2

* U.S. data calendar

2/ STAY OR GO?

European markets will also have plenty to think about closer to home. In Spain, Catalan separatists led by Artur Mas won a clear majority of seats in regional elections on Sunday, setting them on a collision course with the central government over independence. It is far from clear what the result means in practice. The view from the Spanish banks has been that it may lead to financial turmoil, but early market deals suggested a calmer initial response. Spanish stocks were down 0.5 percent but in line with their European peers, and while Catalan 10-year bond yields were up more than 20 basis points, equivalent Spanish yields fell 3 points.

* Spanish assets hold their own after Catalonia vote

* FACTBOX-Catalonia’s secession plan and how Spain would block it

* Portugal centre-right alliance may win more seats but no majority

3/ EMERGING CURRENCY CRUNCH

Many major emerging currencies are on track for their worst quarter in years or even decades, and there is no sign of the sell-off abating. Malaysia’s ringgit has not weakened as much over the quarter since 1997 while Brazil’s real has hit record lows, and chalked up the largest quarterly losses in 13 years. South Africa’s rand and the Turkish lira suffered the most in around four years. Central banks have struggled to contain the fallout through interventions, capital controls, rate hikes and other measures, though often with limited effect while depleting their currency reserves.

* FACTBOX-Emerging central banks step in to curb currency falls – RTRS

* Brazil’s beleaguered currency rebounds after intervention threat

* EM suffers as big boys stay away

4/ EUROPE STOCKS RUN OUT OF ROAD?

The Volkswagen emissions tests scandal is the last thing European stock investors needed. These assets have been one of the year’s biggest bets but are now all but flat on the year. Given the anticipated fallout for the automotive sector, which has just had its worst weekly performance in four years, it would hardly be surprising if European stock investors simply cut and run until the end of the year.

* European investors weigh Volkswagen lawsuits over emissions scandal

* BREAKINGVIEWS-VW equity story is emissions-gate’s worst casualty

* VW could pose bigger threat to German economy than Greek crisis

5/ TURBULENCE AHEAD

This year may be the most turbulent for financial markets since 2008, epitomised by the wild swings in the Brazilian real, which reached extreme levels this week. Recent shocks like the Dow’s 1,000-point plunge on Aug. 24 (and its subsequent rebound) and the U.S. Treasury flash rally last October, have all proved short-lived. That is just as well as policymakers and regulators would probably be powerless to deal with a prolonged fall. But they’re watching very carefully. The Bank of England and European Union this week both warned of growing risks to financial stability. Hold on to your hats.

* EM crises, low rates are risks for European financial stability – EU

* BoE delves deeper into asset managers, “fragile” market liquidity

* “The outlook remains challenging. Downside risks have risen” – Bank of England (Compiled by Nigel Stephenson; Editing by Hugh Lawson and John Stonestreet)

Reuters