World markets themes for the week ahead

LONDON: Following are big themes likely to dominate thinking of investors and traders in the coming week and the Reuters stories related to them: Se7en

The Chinese yuan is under pressure, and close to falling below 7.00 per dollar for the first time in over a decade.

It got some respite as talks planned for later this month between lower-level officials from Beijing and Washington offered a glimmer of hope that the two superpowers may work towards a solution to their escalating trade conflict.

Chinese policymakers are not taking any chances, though, banning some offshore lending to discourage short-selling and support the yuan.

The currency has lost around 10 pct since March, with trade tensions adding to worries about a slowing economy.

Fixed asset investment, industrial output and retail sales data in the past week were all on the soft side.

A light schedule of data releases should take some pressure off the yuan. But global aversion towards emerging markets might still push it towards the 7.00 per US dollar level that many see as a line in the sand Beijing authorities will defend to prevent further currency weakness and capital outflows. Yeah, I’m going to Jackson Hole

It’s that time of year again. Jackson Hole time. Fed Chairman Jerome Powell is scheduled to speak on Friday, August 24, at the annual global central bank conference in Jackson Hole, Wyoming.

He will speak on monetary policy in a changing economy at the start of the two-day conference.

In the past, Fed chairs have used speeches at the Kansas Fedsponsored conference to signal future US central bank policy moves.

The Fed has signalled to markets it will hike interest rates in September and possibly December.

Against this backdrop, the US central bank is shrinking its balance sheet by allowing maturing securities to roll off its balance sheet without replacing them.

Some analysts and investors say the Fed could mention the balance sheet in its latest minutes, to be released August 22, and that could also be a major focus at Jackson Hole.

And what about the waves of Turkey- fuelled risk aversion crashing around global markets? Will Powell nod to that or the damage higher US rates and a rising dollar are doing to emerging markets? Beware the EM bears

The grizzly conditions in emerging markets will remain front and centre. Emerging stocks have just entered bear market territory, the Turkish lira and Argentine peso are locked in turmoil, the yuan and Chinese tech stocks are wobbling and the three R’s - the South African rand, Russian rouble and Indian rupee - are all flashing a deep shade of crimson.

There are a number of events watch out for. Chinese and US officials meet in Washington, just before new US tariffs on US$16 billion of Chinese goods are due to take effect.

Turkey’s markets are closed for most of the week for eid al adha, which could make things volatile because the US Treasury has warned Ankara to expect more economic sanctions unless it hands over detained American pastor Andrew Brunson.

A Turkish court on Friday rejected an appeal for his release.

There could also be progress in the long-running NAFTA saga that has been hanging over Mexico.

US Trade Representative Robert Lighthizer expressed hope on Thursday that a breakthrough could be made in the coming days, though his Mexican counterpart Ildefonso Guajardo cautioned flexibility will be needed. — Reuters