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LONDON, Jan 6 (Reuters) - Following are five big themes likely to dominate thinking of investors and traders in the coming week and the Reuters stories related to them.
A year on from its last market meltdown, volatility in China is back. The central bank is trying to crush speculators betting against the yuan, and in the process overnight interbank lending rates are hitting 60 percent. Closely watched FX reserves data is due to be published by Beijing over the weekend. It won't reveal how much was burned through during suspected intervention to prop up the yuan in recent days, but it will show what was going on as the yuan slid freely in Q4 last year. Reserves could fall below $3 trillion for the first time in six years. They touched $4 trillion in mid-2014. Chinese inflation, credit growth, FDI and trade numbers are all due next week, the last full trading week before the lunar new year. If the money market and FX volatility wasn't enough to keep Beijing on its toes, they're also warning about the over-indulgence in digital currencies like Bitcoin.
* China data to show economy gained momentum heading into 2017 but risks abound
* Offshore yuan set for biggest weekly gain as China bears down on speculators
* Bitcoin extends losses, slides another 12 pct on China warning
* ANALYSIS-China's choices narrowing as it burns through FX reserves to support yuan
Earnings season is here again, and U.S. financial powerhouses Blackrock, JP Morgan and Bank of America Merrill Lynch kick it off with Q4 reports on Friday. U.S. and UK equity markets are near record highs, and valuations have now risen above the decade-average, suggesting tolerance for earnings disappointments is likely to be quite low. Any earnings misses could hit share prices harder than usual. U.S. earnings are expected to grow about 11 percent in 2017. For Europe, they're expected to grow 15 percent. The latter is particularly important as expectations are running high that the region is poised to break a five-year long earnings drought.
* The "January effect" for stock markets is fading
* BofA-ML ups Stoxx 600 targets, sees return of earnings growth
* U.S. banks gear up to fight Dodd-Frank Act's Volcker rule
As inflation rebounds worldwide, the UK stands at the sharpest edge of it given the added effects of sterling's effective devaluation in 2016. Higher inflation has implications for monetary policy and long-term interest rates of course, it may lift manufacturers by improving their pricing power and higher interest rates or steeper yield curves are a boon to banks. But what does it mean for retailers and shopping stocks? UK clothing chain Next's profit warning this week bodes ill for a sector that might struggle to pass on higher costs to consumers. Trading updates next week from mid-tier UK outlets such as Debenhams and M&S could offer some clues, while UK grocers are also reporting seasonal sales - with eyes on fate of Tesco, Sainsbury and William Morrisons another critical test of consumers that have helped hold up Brexit Britain so far.
* UK retail sales edge lower in Dec, price pressures spiral -surveys
* Britain's Next chills clothing sector with cut to profit forecast
* British consumers borrow at fastest rate in 11 years as inflation threat rises
With the U.S. dollar at a 14-year peak, the Fed poised to raise rates again soon and Donald Trump's tweets triggering sharp swings in stock prices and emerging market FX rates, investors are on central bank FX alert. Mexico's central bank burned through a suspected $1 billion this week to lift the peso from a record low after Trump tweeted about Toyota's plans to invest in the country. China has stepped in to shore up the yuan too. Where might be next? Could Turkey's central bank be forced to arrest the fall in the lira, which also plumbed fresh record lows this week in the face of rising inflation, sluggish growth and an escalation in militant attacks? Could a Trump tweet trigger a slide in another country's currency?
* Mexico cenbank sells $1 bln to prop peso after Trump slump
* Trump hits Toyota in latest broadside against car makers and Mexico
* Food, drink push Turkish inflation up in December, lira tumbles
* Turkey's Erdogan calls on banks to lower interest rates
Barely a month after a bruising referendum which claimed Prime Minister Matteo Renzi as a scalp, Italy could be heading for another one. The constitutional court will decide on Wednesday whether or not to give a green light to a referendum on labour market reforms introduced by the Renzi government, as demanded by the country's largest trade union. Apart from the potential reversal of one of Renzi's flagship policies, it adds to the political uncertainty that has plagued the country and widened its bond yield premium over Germany, the region's benchmark, and Spain, its closest peer. If this weren't enough, Italy also faces a ratings review from DBRS on Friday. A downgrade would take away its only Single A rating and increase cost for Italian banks when they borrow from the ECB.
* Italian PM wins Senate confidence vote as new referendum looms
* Italian banks may face rising funding costs after DBRS review
* Italy president starts talks to seek way out of political crisis (Compiled by Jamie McGeever; Editing by Janet Lawrence)