Global Markets Weekahead: another week, another summit

It would be nice to think that with the eurozone having come up with a plan to tackle its debt crisis, investors could focus in the coming week on more than another meeting of global leaders.
Not so. Key central bank meetings, corporate earnings reports and seriously important economic data will have to compete with a Group of Seven summit at the end of the week in the southern French resort town of Cannes.
As one keen observer of financial markets put it: "Another week, another summit". G20 meetings have become increasingly important as the economic clout of developed economies wanes and that of the likes of China, India and Brazil increases.
The coming week's meeting will essentially be watched for co-ordinated efforts or pledges to help stabilise world financial markets, which have been battered this year by the eurozone debt crisis and a slowing world economy.
"The key is just a sense that the policymakers are aware of the challenges that the world economy faces, which are profound, and have the conviction to enact the right policies to deal with this," said Chris Cheetham, chief investment officer of HSBC Global Asset Management.
A more specific issue, however, will be the extent to which China and other countries with large fiscal surpluses are willing to fund the eurozone's rescue fund.
The past week's meeting of eurozone leaders left open to a great extent how the fund - the European Financial Stability Facility - was to increase its firepower, which is arguably the most important part of the agreement.
It has been taken as implicit that China et al will be brought in.
China has sought to lower expectations by insisting the purchase of EFSF bonds is not on the G20 summit agenda.
Crises, however, have a long history of tearing up well-thought out agendas.
How much satisfaction investors get from the G20 may decide just how financial markets perform at the end of the year, a period which historically sees stock markets rallying.
It goes, perhaps, against what many people would expect, but global stocks could quite easily end the year with relatively modest gains.
MSCI's developed market stocks index needs only a little more than 2 percent to break even for the year - a good day's trading.
Most of the major losses have been on volatile emerging markets, but being 13 percent or so in the hole for the year to date is not a rout, particularly when a solid two-month rally could cut deeply into those losses.
Investors, for their part, have begun putting more risk, eg stocks, in their portfolios, albeit cautiously. UK firm Schroders provides a typical example.
"We have increased our exposure to equities and credit over October in the expectation of improved market performance into year end," Johanna Kyrklund, its head of multi-asset investments, said in a note.
"In the short term, US economic data have improved and for the time being the European authorities have kicked the can a little further down the road. However, we remain vigilant."
Just how far along the US recovery from its slump has come will be tested next Friday in the October jobs report.
Employment usually lags. But it is crucial to consumer sentiment, house prices, retail sales and a broad range of major underlying data.