This Global Week Ahead begins with London quiet due to a bank holiday. That status will keep trading volumes light. It’s the end of August. Long European vacations are still underway.

A soft trading volume week might be just the time where the Emerging Market (EM) equities find some footing. Maybe all the bad news is priced in? This week, the ‘canary in the coal mine’ remains the Turkish lira, I’m afraid. Watch that closely.

In addition, we got signs on Monday: Europe’s GDP growth may be rebounding from a soft 1H. A growth rebound here would be welcome fundamental news too.

Below, I list my top five world market themes to watch over the coming week. These I ranked in order of importance to equities, specifically.

Have a great trading week.

(1) Watch the Turkish Lira… Again!

On Monday, Turkey’s currency took a fresh blow. Local trading resumed after being closed for much of last week and traders awaited remarks from the country’s finance chief.

At 2pm in Istanbul, the Financial Times said the Turkish lira was down 4.5%.

While markets in Turkey reopened after last week’s long closure for Eid al-Adha, London was closed for a bank holiday. That means trading volumes may be lighter than usual, given the city’s prominent position in emerging markets currencies trade.

The lira’s fall on Monday contrasted the broader EM currencies market, with MSCI’s broad EM FX index up +0.31%.

The recent foreign exchange crisis drop has left the lira down -39% YTD.

(2) Can Emerging Market Equities Rally from Here?

On Monday, the Financial Times wrote that emerging market (EM) equities rallied, extending gains from last week, as the asset class fights back after falling into a bear market earlier this month.

MSCI’s broad measure of large and medium capitalization EM stocks climbed +1.1% in early European dealings. Markets in the London, one of the main hubs for EM trading, were closed on Monday — meaning volumes may be lighter than usual.

The MSCI gauge has climbed +4.6% from the intraday low it struck on August 16, a day after it declined into bear market territory — dropping 20% from the high it set in January this year. EM stocks have been hit hard over the past few months, leaving MSCI’s index down 8.4% YTD.

In fact, the performance of EM equities this year is the second-worst, beaten by only gold, on a Goldman Sachs ranking of the performance in 2018 of major assets.

(3) Will We Confirm Robust Q2 U.S. GDP growth, and Higher U.S. Inflation?

Second-quarter U.S. GDP growth is likely to be confirmed at a similar rate to the first +4.1% estimate, with price pressures also likely to have picked up.

However, recent survey data suggest both growth and price pressures have since shown signs of cooling as we move through the third quarter, albeit remaining elevated in both cases.

The flash ISH Markit PMI surveys showed growth slipping to a four-month low in August but remaining consistent with +2.5% annualized GDP growth. The survey's price gauge, meanwhile, indicated core PCE price pressures will have lifted higher in July, but could soon start to moderate.

(4) Will the Eurozone Jobless Rate Fall to a New Post-Crisis Low?

A. On Monday, German business confidence increased “noticeably” this month, according to a key gauge that points to improvements after a growth slowdown in the Eurozone’s biggest economy during the first half of this year.

The IFO Institute’s index rose to 103.8 in August, from 101.7 the previous month. The figure easily beat economist expectations in a Thomson Reuters poll of 101.9.
“In addition to a robust domestic economic situation, the truce in the trade conflict with the U.S. contributed to improved business confidence,” IFO President Clemens Fuest said. “The German economy is performing robustly.

The improvement in that closely watched indicator comes as a positive sign for the both the German and broader Eurozone economy, which has posted average quarterly growth in the first half of this year that is slower than in 2017.

B. ECB watchers will be eying unemployment and inflation numbers, with the jobless rate widely expected to dip down to 8.2% from 8.3%, its lowest since December 2008.
Inflation is meanwhile expected to hold steady at +2.1% y/y, though some acceleration is likely in Germany, where the latest survey data showed businesses raising prices at a faster rate in August.

(5) Expect India's Economy to Slow. But GDP Growth Looks Strong!

Second-quarter GDP numbers are expected to show India's economy slowing to a +7.3% annual growth rate, down from +7.7% in the opening months of 2018. Better prospects could be in store for the third quarter.

The Nikkei PMI surveys indicated that India enjoyed its strongest expansion for over one-and-a-half years during July, particularly supported by the services sector.

Top Zacks Rank Stocks—

Wal-Mart de Mexico SAB de CV (WMMVY Quick QuoteWMMVY - Free Report) : It’s a $50B market-cap stock with a name you have partly already heard of — but for a different country.

There is news a NAFTA deal between the USA and Mexico may arrive this week. Watch stocks like this closely. It’s a Zacks #1 Rank pick this week.

Archer Daniels Midland (ADM Quick QuoteADM - Free Report) : This is the big and old Agricultural commodities player in the USA. It is $28B in market capitalization.

With a NAFTA deal between the USA and Mexico, here’s another stock to watch. The Zacks VGM score shows an A, with an A in both Value and Growth… and a Zacks #1 short-term ranking from us.

Telstra Corp. : Australia has yet another new government. This is their big Telco. And it is currently priced around $12 a share. The dividend is excellent at 8.3% annually, when the stock trades this cheaply.

Key Global Macro—

On Wednesday, the U.S. Commerce Department releases Q2 GDP revisions and July personal income and spending data.

On Thursday, Brazil will see updates on Q2 GDP and consumer inflation data.

On Friday, China will release both factory and services activity numbers.

On Monday, the German IFO indexes come out. Business Climate is at 1017, Current Conditions is at 105.3, and Expectations is at 98.2.

On Tuesday, the S&P Case/Shiller home price index comes out. It has been tracking +6.5% y/y.

The unemployment rate in Mexico in seasonally adjusted terms may go from 3.39% to 3.45%.

On Wednesday, the core PCE price index (the one the Fed watches closest) comes out. The prior reading was at 2.0% y/y.

U.S. GDP for Q2 likely gets revised from 4.1% to 4.0%.

On Thursday, the unemployment rate for Germany comes out. It has been 5.2%.

The FGV inflation rate for Brazil (aka consumer price inflation in that country) comes out. It should rise from 8.24% to 9.05%.

The HICP for Germany (aka consumer price inflation in that country) comes out. It has been tracking 2.1% y/y.

U.S. initial claims look quite low at 210K. We get a new reading for this week.

On Friday, China’s manufacturing PMI comes out. It should be stable, moving from 51.2 to 51.0. The non-manufacturing PMI should go from 54.0 to 53.9.

The core HICP for the entire Eurozone comes out. It has been tracking +1.1% y/y.

The unemployment rate for the Eurozone comes out. It has been at 8.3%.

The USA Chicago PMI (at 65.5) and the University of Michigan sentiment (at 95.3) come out.

That finishes up the Global Week Ahead.