The world’s stock markets are open for trading. Traders are looking for cues to an overall direction after a swift week-long correction hit.

The history of corrections shows: There is usually more price action pain before any enduring gain.

We have seen the “It’s Still a Bull Market” optimists “buy the dip.” That may mean traders have to grind prices down to wring out that excess optimism before stock markets move higher… in an enduring manner. Traders in corrections usually need to see capitulation. We haven’t seen that — at all.

For this Global Week Ahead, let’s look into Reuters' five biggest world market themes.

(1) A Key to Rates: the U.S. Consumer Price Inflation Reading on Deck

Whether world markets settle down now — or suffer a fresh volatility shockwave — may be determined by this 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% 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 2nd 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 3.0% 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.

(2) The Return of Market Volatility

Market volatility is back. With a bang. After months anchored at historically low levels, U.S. stock market volatility exploded last 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% 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.

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.

(3) Can European Earnings Reports Get the Bulls Excited?

Another heavy week coming up on the European earnings front and with the recent volume 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 stem a downward trend in forecasts? Recent weeks have seen analysts’ predictions for fourth-quarter STOXX 600 earnings downgraded to 11%, 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% — compare that to 78% for the S&P 500 index. In Europe, “beat” levels in an average quarter run at 50%.

Companies due to report this week include: Heineken, Keurig, 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 that 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) China’s New Year Starts

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.

(5) Submerging Markets Now?

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 not 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.

Top Zacks #1 Rank (STRONG BUY) Stocks

(1) Boeing (BA Quick QuoteBA - Free Report) : When one looks into the rise in the DJIA, a lot is attributed to this 198 billion market-cap stock. The long-term Zacks VGM score is B.

(2) ASML Holding NV (ASML Quick QuoteASML - Free Report) : This is an important semi-chip company based in the Netherlands. The market cap is $79 billion and the long-term Zacks VGM score is F.

(3) LyondellBasell Industries NV (LYB Quick QuoteLYB - Free Report) : Last week, the world’s chemical stocks got hammered. Let’s see where they go this week. This is a $42 billion market cap stock with a long-term Zacks VGM score of B.

Key Global Macro—

On Wednesday, Eurozone GDP growth gets updated. How the Eurozone economy closed out 2017 will be one of three modestly significant macro risks to European markets.

On Friday, we get U.S. housing permits and starts data.

Mainland China’s New Year is Friday.

On Monday, Antad (a retail reading there) same-store sales in Mexico should rise from +4.7% y/y to +6.0 %. This is a sign that Mexico’s economy is improving, with personal consumption lighting the way.

In contrast, in Singapore, retail sales may fall from +5.3% y/y to +3.2%.

India’s CPI should rise from +5.2% y/y to +5.4% y/y.

The monthly US budget deficit is $51.3 billion, which translates into $600 billion a year. With the new tax cut and spending package signed, watch this number rise and rise. Who will put up the bond market finance?

On Tuesday, the CPI in the UK looks hot, as it moves from +3.0% y/y to +2.9% y/y.
 

The unemployment rate in Winter Olympic host country South Korea should be 3.7%. That’s low.

On Wednesday, the CPI for Germany comes out. It looks for +1.6% y/y, and the HICP should be +1.4% y/y, below the ECB’s target of +2.0%.

GDP growth should be happening — +3.0% y/y — in Germany, too.

Meanwhile, Eurozone GPD growth should be +2.7% y/y.

On Thursday, Indonesia’s reverse repo rate should remain flat at 4.25%. This is their monetary policy rate.

The unemployment rate in Australia should go from 5.5% to 5.4%. Both readings are low.

U.S. initial claims should be very low at 221K.

Interestingly, U.S. capacity utilization may fall from 77.9% to 77.1%. This must be an effect of more business cap-ex spending coming on line.

On Friday, U.S. building permits may fall from 1.32 million to 1.28 million. Housing starts may go from 1.192 million to 1.220 million.