LONDON, May 15 (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.
Increasingly erratic and extreme shifts in asset pricing are unnerving investors everywhere. On one level the backup in bond yields makes sense. The deep-seated deflation that was built into bonds after last year's oil price collapse now has to be rethought and repriced. But the speed and shock of the bond backlash has exposed illiquidity and overcooked, over-correlated investment positions. For the past couple of years, both "safe" government bonds and higher risk equities were rising in lockstep. One reason for that has been fear of deflation and the bond-buying QE programmes it inspired. By sinking bond yields to historical lows, equities were catapulted to ever higher records by a relative dividend attraction. The corollary is that what went up together in crowded one-way bets will likely come down together as everyone heads for the exit. Wide daily swings are still a feature of the bond market. It remains to be seen whether the market can find an equilibrium at current levels or if yields still need to push higher.
* Central banks chase investor herd into liquidity trap
* Bond sell-off a shot in the arm for ECB purchase scheme
* BREAKINGVIEWS-Sliding markets may just reflect a reality check [ID:nL5N0Y34OH/
In the above scenario, the outlook for the global economy, and especially the U.S. economy, is crucial. After a first-quarter stalling in U.S. growth, there is little evidence of a rebound. The euro zone economy expanded by more than the United States' in the first three months of 2015, thanks to cheaper oil, a weaker euro and lower borrowing costs, but these are all on the rise. If global demand does not improve, oil prices could fall back and revive the prospect of deflation. U.S. housing market and factory activity data in the coming week will be under the microscope.
* Fed staff say Q1 slowdown was real, not a fluke of statistics
* U.S. factory, consumer confidence data darken Q2 outlook
* Euro zone economy picks up pace but Germany lags
* G7 economic indicator diary
As bonds go, so go the bond proxies. The euro zone's top blue-chip stocks have taken a beating relative to the rest of Europe. The trades that made sense in a world of creeping deflation, namely the already expensive but super-safe dividend-paying conglomerates, are the first to suffer in a world of creeping reflation where not just any yield will do. Couple that with a euro on the up and the long arm of big European exporters doesn't look quite so useful. It's too early to tell whether there's a great unwind at work: bullish equity investors and traders are simply reversing their trades into more domestic recovery plays and inflation hedges. But clearly bubbly valuations were not just restricted to the fixed-income world.
* Bumper earnings trend built on sound foundations
* Sell euros? This year's dead cert becomes frustrating trade
Sterling may have just enjoyed its best fortnight against the dollar in six years, but it is likely to start to lose some of its post-election shine as investors fret over a potential threat of a British exit from the European Union. Prime Minister David Cameron has promised a referendum on the issue by the end of 2017 and with the anti-EU UKIP party gaining almost 4 million votes in May 7's elections, "Brexit" cannot be discounted. That could endanger foreign investment, worsening Britain's current account deficit and driving down the pound.
* UK's Cameron says second Scotland referendum "not remotely" on the cards
* BoE's Carney says "possible" rates will be higher in a year
* BoE minutes due May 20
A string of central banks across emerging markets are deciding on interest rates, among them heavyweights Turkey on Wednesday and South Africa on Thursday. Turkey has been has been battling the lira's falls to record lows and stubbornly high inflation for months, but has steered clear of raising rates in the face of political pressure to revive a flagging economy in the run-up to June polls. Meanwhile South Africa's central bank has said it expects inflation to trend higher in months to come, but indicated the rise would have to be above the target range over a longer period before it considers raising interest rates. Nigerian policy makers also meet in the coming week.
* More than one in 10 Turks unemployed
* Africa feels pinch from rising oil, weaker currencies
* Turkey rate decision May 20, South Africa May 21, Nigeria May 19, Bank of Japan May 22 (Compiled by Nigel Stephenson; Editing by Ruth Pitchford)