Five world markets themes to watch out for this week

LONDON: Following are five big themes likely to dominate thinking of investors and traders this week, and the scheduled events and Reuters stories related to them.

1) Coming Closer

The rumpus over the U.S. budget and the debt ceiling is certain to dominate financial markets in the coming week. As the mid-October deadline for lifting the borrowing cap approaches, tensions already apparent in U.S. short-term bills and credit default swaps may ratchet higher. If a deal is reached to end the government shutdown, and a debt deal looks more likely, that may be a green light for U.S. stocks, which have lagged Europe recently, to rally. Investor focus may then switch back to when the Federal Reserve might begin to wind down its monetary stimulus.

* Latest FOMC minutes due Wednesday

* U.S. Treasury sells three-year bonds on Tuesday, 10-year bonds on Wednesday

* U.S. default seems unthinkable but investors have options

* Money market funds in firing line as U.S. fears creep up

* Washington debt row hits European stocks with U.S. tilt

2) Political Risk

Italian 10-year government bond yields seem to have hit the buffers around 4.3 percent and are still trading above Spanish equivalents, reflecting lingering market apprehension about how strong a hand Prime Minister Enrico Letta has been dealt by the ructions in Silvio Berlusconi's party. Market focus in the coming week will be on how speedily Letta moves to take advantage of a weakened Berlusconi to push through electoral reforms that could signal a more decisive push for fiscal changes. The extent to which sentiment has turned could be reflected in Italian bond auctions next Friday. Recent auctions have seen slack demand and higher funding costs.

* Calm markets peer beyond U.S., Italian political storms

* Italy sells bonds on Friday

* Germany sells five-year bonds on Wednesday

3) How Much Stronger?

One immediate consequence of the partial shutdown of the U.S. government is pressure on the dollar that has helped push the euro to a two-year high on a trade-weighted basis. This is causing headaches for euro zone exporters who face the dilemma of whether to buy at current elevated levels or risk waiting for the euro to lose steam. The fact European Central Bank chief Mario Draghi pointedly declined to take the currency down after the bank's latest policy meeting has made some in financial markets think the euro is bound for $1.40.

* Strong euro messing with ECB's loose monetary policy

* FX COLUMN-Euro zone exporters face dilemma over strong euro

* ECB's Draghi speaks in Cambridge, Mass., on Wednesday

4) Earnings Challenge

The U.S. third-quarter earnings season kicks off with aluminium producer Alcoa first out of the traps. Earnings estimates for companies on both sides of the Atlantic have been cut, with those for European firms downgraded the most. In Europe, where the results season begins in a couple of weeks, many investors had been banking on good third-quarter numbers after a lacklustre first half so sub-par earnings could knock a whole in the region's so far healthy stock market gains.

* Alcoa third-quarter earnings due on Tuesday

* JPMorgan, Wells Fargo earnings due on Wednesday

* Alcoa could start earnings season with a whimper

* Subdued earnings threaten European equity rally

* European cheap stocks set for long catch-up rally

5) Health Check

The International Monetary Fund's annual meetings, which begin in Washington, are a chance to take the temperature of the global economy. In many areas, growth is still modest but at least showing signs of recovery. Accelerated expansion in the Chinese services sector indicates the world's second-largest economy is picking up. A similar survey in Europe showed growth spreading to some of the previously lagging countries. The IMF has already warned that failure to lift the U.S. debt ceiling could harm the world economy.

US debt crisis can cause global financial turmoil: IMF

WASHINGTON: The IMF today warned that an imminent debt default by the US due to the government shutdown would result in disruptions in financial markets and could possibly trigger global economic turmoil.

"Failure to lift the debt ceiling would be a major event,"Olivier Blanchard, IMF's chief economist, said at a news conference at its headquarters here.

The top International Monetary Fund official warned that the failure to raise the debt ceiling -- that would result in the US defaulting on its international obligations -- would have a long term adverse impact on the global economy and would have major consequences in the years to come.

IMF say global economy healthier, but still weak

WASHINGTON: The International Monetary Fund expressed guarded optimism about the state of the global economy on Tuesday, even as it trimmed its forecasts for output and warned about the catastrophic impact of a potential U.S. debt default.

In its latest global economic snapshot, the IMF cut its world growth forecasts for the sixth straight time in less than two years, saying a stronger performance in most advanced economies would fail to make up for a more sluggish expansion in the developing world.

Prospects for emerging markets, long the engine of the global recovery, have dimmed somewhat with both structural and cyclical factors at play, the IMF said.

IIM Shillong Golf Cup Season 6 ends on a high note

SHILLONG: The flagship event of IIM Shillong - Golf Cup Season 6 ended on a high note on the evening of Sunday, October 6th, 2013. The event was organized by IIM Shillong in association with Meghalaya Tourism. The two day event comprised of the Corporate Golf Tournament and IIM Shillong's Annual Management Fest 'Khlur-Thma' which consisted of inter college competitions in different management domains. The Chief Guest for the award ceremony was Dr Mukul Sangma, Chief Minister, Government of Meghalaya.

The Golf Cup saw participation from more than 100 golf enthusiasts, including more than 40 corporate participants from corporations like DBS Bank, Deutsche Bank, Yen Capitals, and Hindustan Unilever among others.

The event also hosted the presence of top government officials including A.L. Hek, Minister of IT and Health and Family Welfare, Government of Meghalaya and Ashok Thakur, Secretary of Higher Education, Ministry of Human Resource Development.

US debt ceiling: What we wake up to on October 18

One cannot rule out the possibility of some sort of a technical default before a compromise is reached on debt ceiling, says Alastair Newton, Senior Political Analyst, Nomura - the one who predicted a red October as early as July.

While India has a total exposure of $59.3 billion to US Treasury Securities, China and Japan have it at $1.1 trillion each as of July 2013, as per the data available on the official website of the US Department of the Treasury.

But there's no worry on this front, for now. "I don't mean a default on the US Treasuries," explains Alastair Newton, "... but that we get across the October 17 deadline and the Treasury has to start being selective about which bills to pay."

Mexico urges US to reach deal on raising debt ceiling

MEXICO CITY: Mexico's finance minister urged the United States on Tuesday to reach an agreement on raising its debt ceiling, saying a failure to do so could seriously damage financial markets and the global economy.

"(This) has the potential to enormously affect financial markets and therefore not just the United States' economy but also the economies of the rest of the world," Finance Minister Luis Videgaray told Mexican radio.

"It's an event that could be so serious that I think we all trust that the lawmakers and the executive of the United States will find the means to reach an agreement," he added.

India may have to use policy buffers wisely to tackle outflows: IMF

WASHINGTON DC: The International Monetary Fund has cautioned that emerging economies such as India will need to employ "policy buffers wisely" if they confront significant capital outflows on US Fed Reserve's tapering of monetary stimulus.
"Emerging economies need to facilitate an orderly adjustment in their financial markets. If they are faced with significant capital outflows, policy buffers may have to be used wisely," the IMF said in its Global Financial Stability Report. The report, coming ahead of the annual meeting beginning Thursday, says policymakers need to address domestic vulnerabilities by strengthening macro-financial frameworks and buffers.
Financial authorities may need to intervene to ensure the process is smooth, the report suggested. Developing countries saw a larger than normal surge in investments in debt over the past five years, said Jose Vinals, the IMF's financial counselor. These investments are beginning to go out as interest rates rise in the US and the economy recovers.