Here are Reuters in London’s five big world market themes. These are likely to dominate the thinking of investors and traders in the coming week.

They are listed in order of importance to equities.

(1) What Happens to Deutsche Bank and the Rest of Europe’s Banks?

Europe’s bank shares — hard-hit by Italy’s bond selloff and euro break-up fears — enjoyed a rally last week, as Rome averted snap elections. But the turbulent times have revealed some cracks.

If Italy’s new government proceeds with big spending or plans for mini-BOTs — effectively a parallel currency — its debt rout may resume, alongside selling of shares and bonds of banks with Italian exposure. French lenders stand out here: BNP Paribas’ exposure to the Italian sovereign is a quarter of its core capital buffer while Credit Agricole’s is 14.3 percent.
 

Second, money markets are hinting at signs of funding stress; 3-month Euribor — the rate at which Eurozone banks lend to each other — has risen to nearly six-month highs. But French banks may be driving Euribor rises too, a Bank of America Merrill Lynch report said, noting that French lenders, which raise a lot of U.S. dollar funding, may have been driven into euro markets by the recent rises in LIBOR-OIS spreads.

Meanwhile, credit default swaps for European banks have soared, with Credit Agricole and BNP Paribas trading at one-year highs.

Finally, there are concerns about Deutsche Bank. The lender’s shares have slumped and bonds and CDS have jumped after reports the Fed considers the bank’s U.S. operations as “troubled.”

(2) Will U.S. Trade Actions and the U.S. Dollar Collide?

The U.S. dollar has risen almost 7 percent from three-plus year lows hit in February and is up about 2 percent for the year. But the rally looks awkwardly timed, with the U.S. trade deficit near it’s biggest in a decade and President Donald Trump risking a trade war, with import tariffs on some of his country’s closest allies.

That should put markets’ focus squarely on Wednesday’s report on April’s international trade balance. If the deficit widens to the expected $51.3 billion, it would be close to February’s $57.7 billion — the biggest gap since October 2008.

Much of the dollar’s recent move came after May 3 data showing the March trade deficit had shrunk 15 percent to $49 billion. On the surface, a rally seems intuitive. But these are unusual times, with the President going after steel, aluminum and even auto exports from Canada, Mexico and the EU, not to mention China. If the dollar recovery continues it could — counterproductively — make U.S. exports costlier.

Canada and Mexico hit back Friday with levies on U.S. goods, from orange juice to pork, while the EU was set to tax bourbon whiskey and Harley Davison motorcycles.
It might not be too big a leap from tit-for-tat protectionism to competitive, or market-influenced, currency depreciation against the dollar — perhaps an unintended consequence of the White House shouting ‘unfair’ at its partners and kicking off the negative spiral.

(3) Will Italian Politics Keep Moving to a Safer Place?

Italy appears to have averted early elections and its bond yields — that surged to multi-year highs in recent days — have retreated. But with developments in Rome still in the spotlight, a sustained recovery is unlikely.

A coalition comprising the 5-Star Movement and the League is being installed after the anti-establishment parties agreed to substitute a Euroskeptic initially proposed as economy minister.

But the parties have big spending plans that will challenge EU fiscal rules; among other issues, they have spooked markets by mooting the issuance of securities to clear state payment arrears — and many see the plan as a way to introduce a parallel currency to the euro.

(4) Turkey’s Lira Will Be Volatile; Monetary Policy This Week

Another nail-biting week lies ahead for Turkey: Monday brings an inflation print that may show that the recent currency rout has exacerbated stubbornly high, double-digit price growth.

Then the central bank meets on Thursday to decide on interest rates after administering a 300 basis-point emergency rate hike in May and launching a simplified interest rate framework on June 1.

The bank is caught between President Tayyip Erdogan — a self-styled enemy of interest rates who also faces elections on June 24 — and markets that want higher rates in order to combat inflation.

The lira has risen off record lows plumbed in May but remains 18 percent below end-2017 levels. Next week’s policy meeting could clear the path for it to recover or relapse.

(5) India Sets Monetary Policy This Week

India could join the growing club of emerging market central banks that are tightening monetary policy — on Wednesday it may deliver its first interest rate hike in nearly 4-1/2 years.

A rate rise on June 6th is far from a given. While inflation is above central bank targets and the rupee is this year’s worst Asian performer against the dollar, analysts predicted that worries about economic growth and the impact of $80-a-barrel oil on consumers would keep the Reserve Bank of India on hold.

Last Thursday, India surprised markets with a GDP print that was its strongest in two years. Now, against the backdrop of a growth rate faster than China’s and risks of a fresh flare-up in global trade tensions, Indian policymakers may join their peers in Indonesia in putting a floor under their currencies.

Top Zacks #1 Rank (STRONG BUY) Stocks—

Some stock prices are moving ahead this year, and some are treading water.

Let’s delve into that.

Zebra Technologies (ZBRA Quick QuoteZBRA - Free Report) : This is an $8B market cap stock, with a nice B in Zacks long-term VGM score. It is a manufacturer of digital tracking products. This stock has been on a nice roll this year.

Zebra builds tracking technology and solutions that generate actionable information and insight, giving companies unprecedented visibility into their businesses by giving physical things a digital voice.

Zebra's extensive portfolio of solutions gives real-time visibility into everything from products and physical assets to people, providing very precise operational data not only about where things are, but what condition they are in.

This allows business leaders to use data to make better, more informed decisions, respond in real-time and ultimately, help businesses understand how they work, and how they could work better.

Anhui Conch Cement (AHCHY Quick QuoteAHCHY - Free Report) : This is a $7.8B market cap Mainland China maker of building products, concrete and aggregates. It holds a Zacks long-term VGM score of A. This is another stock on a nice momentum run this year.

Anhui Conch Cement Company Ltd., together with its subsidiaries, manufactures and sells clinkers and cement products under the CONCH brand in the People's Republic of China and internationally. It also provides construction and installation services for industrial purposes; logistic and loading services; and mining and related services.

In addition, the company manufactures and sells cement packaging products and refractory materials; trades in coal products; and develops and sells profile and related products, as well as exports clinker and cement products.

Anhui Conch or Conch Cement is the largest cement manufacturer in Mainland China.

Graco (GGG Quick QuoteGGG - Free Report) : This is a $7.7B market cap U.S. general industrial manufacturer. The long-term Zacks VGM score is C.

This stock has gone nowhere this year. It’s place in an old industrial niche, and fully valued long-term metrics, are likely leaving no catalyst in place for this stock.

Graco Inc. is a leading provider of premium pumps and spray equipment for fluid handling in the construction, manufacturing, processing and maintenance industries.

Headquartered in Minneapolis, Minnesota, Graco works closely with distributors around the world.

Key Global Macro—

Headlines on NAFTA negotiations may bounce into view this week. However, the Mexican Presidential election is July 1st. This likely kills any major deal until there is a newly installed President there.

The FOMC went into blackout on Saturday June 2nd ahead of the (25 bps hike?) FOMC rate decision, a forward policy statement, Fed macro forecasts and Chair Powell’s press conference. Expect minor forecast changes to the Summary of Economic Projections out on June 13th.

On Monday, the UK’s CIPS/Markit Construction PMI came in at 52.5. That says Brexit worry is not tanking the economy, but not causing any lift either.

On Tuesday, Australia’s Reserve Bank of Australia (RBA) has a monetary policy meeting. The rate at 1.5% is not likely to change.

The Eurozone composite PMI is out. The prior reading is 54.1.

The U.S. ISM non-manufacturing index comes out. The prior reading was 56.8 and the new reading is for 59.0.

Some bad news: Brazil’s Markit composite PMI is forecast at 49.9. 50 is expansion territory. Brazil may be sliding into a recession.

On Wednesday, India’s monetary policy rate, the cash repo rate, is re-set. The 6.0% rate is not expected to change.

The Eurozone seasonally adjusted GDP growth rate it out. The prior reading was +2.5% y/y.

Greece’s unemployment rate comes out. With concern on Italy, watch this. The prior reading was 20.8%.

On Thursday, U.S. initial claims should be super-low again, at 221K.

Japan’s GDP, in q/q terms, comes out. The prior reading was a -0.2%. The annualized number was -0.6%.

On Friday, Indonesia’s GDP comes out. The prior was 5.06% y/y.