LONDON (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.

1/GERMANY’S ‘MUTTI’ BOWS OUT

Sunday’s German election is a close call and stakes for Europe’s biggest economy couldn’t be higher. After sixteen years of consistent, centre-right leadership Angela Merkel is stepping down.

The polls indicate that the Social Democrats, which are centre-left, will join forces with Greens and FDP to form a coalition. They have been nicknamed the “traffic light alliance” because they use the same red, green and blue colours.

There are other possibilities, however, as the undecided vote is at its highest level in recent history. Olaf Scholz, the SPD’s Olaf Scholz, is the choice of voters to succeed Merkel. However, coalition talks may take weeks or even months. The market reaction to the outcome of the election could be premature.

-Reuters election graphic: https://tmsnrt.rs/2URCJH0

-German candidates clash in last TV debate before vote as SPD lead narrows

(Graphic: German election eyes finishing line – https://fingfx.thomsonreuters.com/gfx/mkt/zgpombjywpd/germany2209.PNG)

2/DATA DIVE

The Federal Reserve has cut its 2021 U.S. growth forecasts and projects a 5.9% rate, versus 7% previously. The coronavirus is continuing to hamper the recovery will be revealed by the next data.

After August’s readings fell to six months lows, consumer confidence for September appears on the horizon.

    With data on home sales and prices of homes, the market will be able to get an updated view of the housing sector. The personal consumption expenditures(PCE) index will also provide a snapshot of inflation. According to Reuters, the Fed’s preferred inflation indicator will see a 3.7% increase annually. This is slightly higher than 3.6% in July.

-Fed signals bond-buying taper coming ‘soon,’ rate hike next year

(Graphic: US consumer confidence – https://fingfx.thomsonreuters.com/gfx/mkt/zdpxodawbvx/Pasted%20image%201632325697106.png)

3/CAUTION! FRAGILE CHINA

The woes of debt-saddled Chinese developer Evergrande are gnawing at global markets. It’s not surprising, given that the nation’s property sector is responsible for 25% of its huge economy.

Although the developer faces additional payment deadlines in the next week, the larger picture and the size of China’s economy suggest that there is a high risk of global economic slowdown. European elevator-makers, commodity prices, and emerging markets currencies have all been affected by the rising heat.

BIS data indicates that Chinese banks have approximately $1.6 trillion in cross-border liability as of 2021. Any implosion of Chinese banks could have ripple effects across the globe due to their exposure to real property, via mortgage loans and lending properties companies.

-China’s Evergrande problem today may dent global growth tomorrow

(Graphic: Euro area inflation – https://fingfx.thomsonreuters.com/gfx/mkt/akpezqnlzvr/Pasted%20image%201632327337731.png)

4/HIGH HICP

The ECB reportedly expects inflation to hit 2% by 2025. Although analysts are cautious, rising power prices, and seepage into inflation expectations could suggest that the ECB expects it to reach 2% by 2025.

It is worth looking at the advance readings for the euro area HICP and German HICP (the harmonised index consumer prices used in the ECB) due on Thursday and Friday. German HICP reached a thirteen-year peak of 3.4% in august, and consumer inflation was at 3.9% for the first time since 1993.

Surveys suggest that Euro-area consumer inflation expectations are up by double this year. Meanwhile, bloc-wide HICP reached 3% in August. This is the highest level since 2012. Inflation expectations for the Euro area have doubled this year, surveys suggest. Meanwhile, the bloc-wide HICP reached 3% in August. This is the highest since 2012.

– ECB braces for sticky inflation; eyes end of emergency stimulus, sources say

(Graphic: Japan election bets – https://fingfx.thomsonreuters.com/gfx/mkt/zdvxodkjapx/Pasted%20image%201632408971742.png)

5/PICKING A PREMIER

Japan’s ruling party votes for its new leader on Wednesday, with the victor set to be the next prime minister. It’s an extremely close race.

Taro Kono (vaccine minister) is the clear frontrunner. Fumio Shishida (ex-foreign minister) is the main challenger. Both Sanae Takaichi (also former ministers) and Seiko Noda (again, long shot), are vying for the title of first female in the top job.

Although Kono is loved by rank-and-file members of the Liberal Democratic Party, party veterans worry about his reputation as an eccentric. Kishida, while more conservative than Kono, is hampered by his bland image.

If Kono does not win the majority of votes, then two top candidates will face off in a second round. Kishida should have an advantage.

Kono seems to be the favorite of investors. His policies could have a positive impact on office tech and renewable energy shares. They outperformed medical service shares, which Kishida favors higher spending.

-Economic policy stances of candidates to be Japan’s next PM

-Investors raise bets on Kono in Japan leadership race

(Graphic: China property comes crashing down – https://fingfx.thomsonreuters.com/gfx/mkt/zdpxodjoxvx/Pasted%20image%201632467792327.png)