LONDON (Reuters). – With a UN warning “the clock ticking loudly”, the alarms ringing in their ears and governments at the COP26 talks taking place in Scotland, they will attempt to reach an agreement on emissions reductions to limit global warming.

The U.S. Federal Reserve and Bank of England are also hosting key meetings. Japan also goes to the polls.

1.COP OUT

World leaders from over 200 countries will gather in Glasgow to participate in the COP26 Climate Talks, which aims at addressing global warming.

There is an urgent need to make progress in the wake of recent extreme weather events, such as floods, droughts, and forest fires.

However, net zero emission legislation has not been adopted by many of the world’s top emitting nations. China and Russia won’t be attending the summit, and India rejected requests to declare zero-carbon targets.

Even though the original deadline for 2020 was met, an annual goal of $100 billion to support developing countries in tackling climate change is still not achieved.

Markets will be flooded with announcements and events. This is especially important when considering how investors and companies may be affected by new technology, stricter regulations, and changing trends.

(GRAPHIC: Global warming resulting in higher mean temperature and precipitation – https://graphics.reuters.com/CLIMATE-CHANGE/IPCC-REPORT/myvmnmeozpr/IPCC_simulations.jpg)

2.TAPER TIME

    The Federal Reserve is widely expected to announce a pullback in asset purchases when its policy meeting ends on Wednesday.

    Plans to “taper” $120 billion in monthly purchases of Treasury bonds and mortgage-backed securities are well telegraphed. This stimulus is a powerful prop for asset price, and removing it would have unexpected consequences.

    Investors are also keen for hints about when the Fed might start raising interest rates. Jerome Powell, the Fed’s chief economist, has stated that it is now time to reduce asset purchases but it is too soon to turn up the interest rates.

    We will also get a view of the jobs market from Friday’s monthly payrolls report — especially interesting following below-forecast Q3 GDP.

(GRAPHIC: Fed assets held – https://fingfx.thomsonreuters.com/gfx/mkt/zjpqkelgxpx/Pasted%20image%201635348697191.png)

3 A BOE HIKE OR NOT

The Bank of England plans to join other central banks who have raised interest rates. It is not clear if it will act at Thursday’s meeting, or if it will give itself additional time.

The expansionary budget might have given permission for a rise. BoE actions hinge on the question of whether inflation — which was forecast to reach 5% when the British economy is motoring out from the pandemic — will be as short-term as expected.

Rising inflation and comments by Governor Andrew Bailey, hawkish policymakers have caused a drastic repricing in rate expectations. A 0.15% rate hike to 0.25% has been priced for Thursday with another expected move in December.

The BoE needs to be cautious in the face of fragile economic growth. However, sterling could suffer if the BoE does not send a significant hawkish message.

(GRAPHIC: UK GDP remains almost 5% below pre-COVID trend – https://graphics.reuters.com/BRITAIN-ECONOMY/mypmnggbkvr/chart_eikon.jpg)

4/NO MORE FROM OPEC+

With oil prices at $80-plus, which are causing inflation to rise and hindering growth prospects for many countries that rely on it, the governments of these energy-consuming states have urged OPEC+ members to purchase more oil. The group is expected to follow the plan and increase December’s output by the same amount as was agreed previously.

Alexander Novak (Russian Deputy Prime Minister) told Reuters last week that he anticipated the alliance adding 400,000 barrels per hour of production to its existing agreement.

Saudi Energy Minister Prince Abdulaziz bin Salman has also rejected calls from consumer countries to accelerate the pace of production growth. According to him, the oil market is not in crisis. Oil price predictions are, unsurprisingly, trending higher.

(GRAPHIC: Oil price forecasts for 2021 – https://graphics.reuters.com/OIL-PRICES/POLL/jnvwewngqvw/chart_eikon.jpg)

5/KISHIDA’S COURSE

Fumio Kishida, the Japanese Prime Minister, was elected a month ago. However with Sunday’s lower house elections, it is clear that his job is at stake.

Although polls show that his Liberal Democratic Party will retain an absolute majority of the vote, its projected loss is still a significant one. If the party’s performance is poor, it will be required to find a replacement leader before next year’s crucial upper house elections.

Apart from Kishida’s professional career, this outcome could also call into question promises of fiscal stimulus in excess of several hundred of billions. This is the help that the economy requires, considering recent inflation and growth downgrades from the Bank of Japan.

The election results will reveal if short-selling Japanese government bonds futures is a wise move to get higher yields. Or whether the domestic life insurers that buy long-dated bonds are going to win.

(GRAPHIC: Japan’s yields and inflation ticking higher – https://fingfx.thomsonreuters.com/gfx/mkt/gkplgxolqvb/Pasted%20image%201635491680033.png)