LONDON, Feb 9 (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.
Whether world markets settle down now or suffer a fresh volatility shockwave may be determined by next week's consumer and producer price inflation readings in the United States.
They are expected to show U.S. consumer prices rising at the 2.1 percent year-on-year rate they grew at in December but any stronger and it would feed bets on faster Fed rate hikes, potentially triggering another dump in stocks and bonds - don't forget this whole blowout whipped up after Feb 2 U.S. jobs data showed the strongest year-on-year wage growth since 2009.
If U.S. inflation does accelerate, markets could see Treasury yields get above the 3 percent level that several investment banks had set as their year-end target.
U.S. inflation is not the only game in town though. British January data (due Tuesday) will be in focus after the Bank of England's recent hawkish comments. Finally, we get German numbers (Wednesday). These should show price growth still subdued, though wage deals and a new coalition government will likely lift future inflation.
Inflation data for big economies may test nervy markets again
Bank of England raises prospect of higher rates as global economy booms
Fed's Bullard says job market strength may not augur higher inflation
China's January inflation eases even as global price anxiety grows
2/VOLATILITY DON'T PULL YOU THROUGH
Market volatility is back. With a bang. After months anchored at historically low levels, U.S. stock market volatility exploded this week. The rise in the VIX index on Tuesday was the biggest in its history. Trillions of dollars were wiped off of global equity market cap and, according to Goldman Sachs, Wall Street's near 10 percent drawdown was steeper and faster than the historical average of all corrections and bear markets going back to the Second World War.
Have we now moved to a "high vol" regime from a "low vol" regime, and will equity volatility serious infect other markets? Investors will be seeking clues next week. Above 30, the VIX is on track for its highest weekly close in over six years. Investors will want to see that come down to 20 or lower, while so far at least, contagion to FX, rates and credit markets has been limited. That may change if the VIX stays where it is.
COLUMN-Carnage, but no crisis as long as FX and rates volatility stays low: McGeever
COLUMN-The biggest risk to the market? The market itself: McGeever
ANALYSIS-Trillion-dollar risk lurks if market volatility doesn't abate
*GRAPHIC-World markets: Volatility uncorked
3/CAN EUROPEAN EARNINGS TEMPT BACK THE BULLS
Another heavy week coming up on the European earnings front and with the recent vol jitters wiping 0.8 trillion euros from the region's stocks, company updates are going to be key if there is any chance of the bulls coming back.
So will the results will stem a downward trend in forecasts? Recent weeks have seen analysts' predictions for fourth-quarter STOXX 600 earnings downgraded to 11 percent, according to Thomson Reuters I/B/E/S, from 18 percent a few weeks ago.
What's more, the earnings "beats" in Europe are currently 48.2 percent - compare that to 78 percent for the S&P500 index. Even in Europe, "beat" levels in an average quarter run at 50 percent.
Companies due to report next week include Heineken , Kering, Credit Suisse, Enel , Airbus, Nestle, Allianz, Renault and Eni.
One saving grace is that recent selloff has cheapened share valuations. So, in theory at least, that takes some pressure off those who fall short of expectations. In the end though it might just be the moves of the might S&P 500 and Dow across the pond that have the most influence on proceedings.
4/HAPPY (LUNAR) NEW YEAR
It's a tradition Chinese authorities are keeping alive even at a time when they are cracking down heavily to try and wean the economy off debt: keeping the money markets amply supplied and stable during the week-long Chinese new year holidays.
Even though the People's Bank of China has refrained from injecting cash through money market operations for nearly two weeks, repo rates are soft and interbank funding has been smooth.
It is expected to stay that way next week even as consumers and companies withdraw huge amounts of cash to spend and distribute over Chinese New Year - and banks fund their books for the Feb 15 - 21 holiday week.
That is partly because of some longer tenor repos the central bank did at the beginning of the year and a generous cut made to some banks' cash reserve ratios which has given them more room to play with.
Longer term Chinese government bond yields are down too since January and haven't kept pace with the rise in yields elsewhere in the Western world. Analysts suspect that is deliberate from Beijing to keep Chinese markets insulated from a global bout of monetary tightening.
Red packets are traditionally given at Chinese new year to symbolize good luck and ward off evil spirits. This could be the PBOC's gift.
China central bank reaffirms prudent, neutral monetary policy in 2018
China's money rates fall as cash conditions stay loose
Emerging market shares may have shared the pain, but bonds and currencies have outperformed for the most past during the global February freak out leaving investors wondering how long this traditional volatile asset class can keep it up.
EM dollar debt spreads -- the premiums investors demand to hold these bonds rather than U.S. Treasuries -- have been rising but it hasn't been earthshaking and they are still lower on average than at any point in 2015, 2016 and 2017.
That is probably due to the sleepy dollar as much as anything, but if it gets shaken awake or global markets take another serious lurch the resistance could be broken.
One of the long-running EM issues - Jacob Zuma's departure from South Africa's Presidency could also come to a head, while another hotspot, Turkey, will publish its latest inflation numbers. It has been rising fast and the central bank wants it down. The catch is the government doesn't want interest rates to go up.
Erdogan calls on Turkish cenbank, watchdog to take active role in lowering rates
South Africa's rand firmer as bulls hang in despite Zuma impasse
Markets carnage sees EM stocks set for worst week in 6-1/2 years
(Reporting by Marc Jones, London markets team; Vidya Ranganathan in Singapore and Jennifer Ablan in New York; Editing by Toby Chopra)