The last mile: World market themes for the week ahead

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What investors will be watching over the next seven days

Central banks in the United States, Japan and Britain meet, while Germany holds a vote of no confidence in the government.The U.S. Federal Reserve is expected to continue monetary easing with a 25 basis point rate cut on Wednesday, in what would be its third straight reduction, with the latest consumer price index rising in line with economists’ estimates.

But as the Dec. 19 decision looms, the signal is becoming clearer - even if the outcome is still uncertain. No doubt the BOJ decision is live, meaning market volatility could be high. One mooted risk is that the Fed surprises by not cutting rates on Dec. 18, triggering a jump in dollar/yen. But the devil is in the details. Goldman Sachs says just 18% of DAX sales come from Germany versus the 33% for companies on the mid-cap MDAX, which is down 1.1% this year. German corporate earnings shrank 5.4% on an annual basis in the third quarter, versus 8.2% growth for STOXX earnings, based on LSEG data.

Employer tax hikes in the Labour government’s October budget motivated big businesses to warn of price rises, fuelling inflation concerns and helping propel sterling to 2-1/2 year highs against the euro as the ECB eases policy more rapidly than the BoE. That was the takeaway from November PMIs. December numbers, out across the globe next week, should show if the slowdown is getting deeper.

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