(Reuters) – It’s been a busy week for the central banks of the United States, Japan, Britain and Mexico. Will the Turkish central bank make further cuts?

Fitch, a ratings agency, has declared a default in China Evergrande Group’s saga. Plus: Does SPAC-mania have a comeback?

Here’s your week ahead in markets from Kevin Buckland https://www.reuters.com/journalists/kevin-buckland in Tokyo; Ira Iosebashvili in New York; Abhinav Ramnarayan https://www.reuters.com/journalists/abhinav-ramnarayan, Dhara Ranasinghe https://www.reuters.com/journalists/dhara-ranasinghe and Karin Strohecker https://www.reuters.com/journalists/karin-strohecker in London.

1. A TAPER LITTLE ON XMAS

What level of Federal Reserve hawkishness can markets tolerate? The Fed’s last meeting in 2021 will be the moment we get our answer.

Its largesse has helped the more than double from its March 2020 lows, but lately stocks have oscillated between Omicron woes and taper expectations, with Fed Chairman Jerome Powell flagging https://www.reuters.com/markets/us/powell-yellen-head-congress-inflation-variant-risks-rise-2021-11-30 policymakers would discuss a faster taper of bond purchases.

Some have speculated that a degree of Fed hawkishness may already be baked into equities https://www.reuters.com/markets/europe/wall-st-hits-reset-after-market-froth-fed-fears-loom-2021-12-08, which have risen in recent days.

Signs the Fed is growing more worried about inflation – even after suggesting it was time to retire “transitory https://www.reuters.com/article/usa-fed-instant/feds-powell-floats-dropping-transitory-label-for-inflation-idUSKBN2IF1S0” from its description of U.S. price rises – could roil markets. There could also be suggestions that the Fed will increase rates faster in its “dot plot”, projection of rates.

2/READY FOR MORE

Within 45 minutes of one another, on Thursday the Bank of England (UK) and European Central Bank (European Central Bank) will announce their policy decisions. Both are potentially market-moving https://www.reuters.com/markets/europe/global-markets-cenbanks-analysis-graphic-pix-2021-12-06.

Uncertainty fuelled by the Omicron COVID-19 variant has dented expectations for a near-term BoE rate hike https://www.reuters.com/markets/europe/boe-rate-hike-plan-up-air-again-due-omicron-risks-2021-12-07, but markets are not entirely ruling out a 15 bps move either.

The ECB must confirm that its 1.85 trillion Euro PEPP Pandemic Stimulus Scheme will be ended in March. Its hawks and doves now go to battle over how much support to leave in place once PEPP ends -Omicron and sticky inflation complicate the debate https://www.reuters.com/markets/rates-bonds/euro-zone-inflation-hump-near-its-peak-will-decline-next-year-lagarde-2021-12-03.

The Bank of Japan has concluded a two day meeting. A decision to phase out some pandemic-stimulus programmes when they expire in March could be made https://www.reuters.com/world/asia-pacific/boj-has-no-need-modify-ultra-easy-policy-says-deputy-gov-amamiya-2021-12-08. Omicron could also allow for their extension.

3/D FOR DEFAULT

The China Evergrande Group, an embattled developer seems to be at the end.

A missed $82.5 million coupon payment is set to be the domino https://www.reuters.com/markets/rates-bonds/whats-next-china-evergrande-after-missing-coupon-payments-2021-12-07 that triggers cross-defaults worth around $19 billion on Evergrande international debt, along with the more worrisome risk of contagion for the broader economy and markets from its $300 billion in total liabilities.

A Fitch downgrade https://www.reuters.com/business/chinas-kaisa-kicks-off-12-bln-debt-restructuring-after-missing-pay-date-source-2021-12-09 to “restricted default” knocked commodities including crude on renewed worries about China’s economy. Although authorities assure the situation is under control, they still have many tasks at hand.

The central bank cut bank reserve ratios https://www.reuters.com/markets/rates-bonds/china-central-bank-cut-reserve-requirement-ratio-second-time-this-year-2021-12-06 to stimulate growth and then raised FX reserve requirements https://www.reuters.com/markets/currencies/china-raises-banks-fx-reserve-requirements-2nd-time-this-year-2021-12-09 to stem a yuan rally. The government also faces a growing diplomatic boycott of https://www.reuters.com/lifestyle/sports/no-plans-uk-ministers-attend-china-winter-olympics-pm-johnson-2021-12-08 the Beijing winter Olympics, potentially drawing battle lines with the West.

4/SPACTACULAR REBOUND

Due to Donald Trump’s poor trading, a flood of deals and a few good trades, special purpose acquisitions companies (SPACs), have seen a revival.

Choppy markets witnessed the SPACs boom come to an abrupt halt in the recent months. But now, it’s back to normal after Omicron-driven expectations about more central banks largesse have pushed blank-cheque vehicle volumes above $144 million for the year.

A number of SPACs listed in New York https://www.reuters.com/markets/us/grove-collaborative-go-public-via-15-bln-deal-with-branson-backed-spac-2021-12-08, Amsterdam https://www.reuters.com/markets/deals/amsterdams-odyssey-buys-benevolentai-europes-biggest-spac-deal-2021-12-06 and London https://www.reuters.com/markets/europe/arnault-backed-group-launches-second-spac-listing-2021-12-07 while “de-SPACs” have seen news website Buzzfeed, British pharma firm BenevolentAI and bitcoin miner Griid Infrastructure agreeing mergers. Donald Trump’s social media venture https://www.reuters.com/markets/us/exclusive-trumps-social-media-venture-seeks-1-billion-raise-sources-2021-12-01 is raising $1 billion to augment its October SPAC merger.

There have been reminders of risks with EV maker Lucid subpoenaed https://www.reuters.com/technology/electric-car-maker-lucid-receives-subpoena-us-sec-2021-12-06 by the SEC and Singapore ride-hailing firm Grab tumbling https://www.reuters.com/markets/us/singapore-ride-hailing-firm-grabs-nasdaq-debut-set-tone-regional-listings-2021-12-01 20% on its debut. For now, SPAC-mania continues.

5/WILL TURKEY TRIM AGAIN

Turkey’s central banks will be facing another day of reckoning on Thursday. Policymakers must decide whether to follow President Tayyip Erdogan’s lead https://www.reuters.com/markets/rates-bonds/turkeys-lira-weakens-2-erdogan-endorses-low-rates-anew-2021-12-08 and double down to cut rates in the face of more than 21% inflation or whether a weak lira – down 36% this quarter https://www.reuters.com/world/middle-east/erdogan-says-he-hopes-turkish-lira-will-steady-soon-2021-12-04 – has stymied the push lower.

This week’s events will confirm Turkey as an exception among emerging central banks that are hawkish and struggling to cope with rising inflation. The Fed could also begin its tapering cycle. Hungary https://www.reuters.com/markets/europe/hungary-central-bank-seen-raising-base-rate-again-next-week-2021-12-08 is expected to hike 30 bps on Tuesday, Russia https://www.reuters.com/markets/europe/russian-annual-inflation-rises-84-highest-level-since-early-2016-2021-12-08 could follow with a 50 bps hike on Friday.

Across Latin America, a region that has seen sizeable rate hikes over the past year, expectations are high that Chile on Tuesday, Mexico on Thursday https://www.reuters.com/markets/stocks/mexico-inflation-quickens-faster-than-expected-20-year-high-2021-12-09 and Colombia on Friday will all raise benchmark rates.