Take Five: UK May-day and US curveballs - World markets themes for the week ahead

(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/ CURVE-BALLS With major parts of the U.S. economy visibly slowing, the Treasury market has reacted in a striking manner - the 10-year yield is close to falling below the two-year yield, which would mark the curve inversion that has preceded every recession in the last 40 years. Signs of slowdown have persuaded markets to bet the Fed will slow the pace of rate increases next year. But wait. Inflation is running at a 9-month high, annual wage growth a 9-1/2 year high and unemployment at a near-50 year low. So November inflation, due on Dec. 12, will play into how Fed chair Jerome Powell frames the path of future tightening. So it remains to be seen where the curve goes from here. There are reasons to believe it can steepen and reasons to believe it will invert. Depending on how the incoming data looks - stagflation, anyone? - the Fed's view on where neutral is and what its policy response should be in the coming months is far from clear. (For a graphic on 'Inflationary Pressures' click https://tmsnrt.rs/2REoChx) (For a graphic on 'U.S. Yield Curve' click http://tmsnrt.rs/2zUqXiW) 2/ MAYDAY! MAYDAY! Buckle up for another wild week of Brexit may-hem on sterling and other UK-focused markets. Britain's parliament is - at the time of writing at least - set to vote on Prime Minister Theresa May's Brexit transition deal on Tuesday, but the chances of it being approved don't look good. What happens then is... well that's the thing, there are multiple possibilities, all with very different implications. A really heavy defeat would make it difficult for May to carry on. She has staggered through the last couple of years, taking direct hits from all angles but this could finally bring her down. Could that then lead to a hard Brexiteer taking the reins and ripping up the deal? Perhaps and sterling won't like that one bit. But it's equally possible that whoever takes over would press pause on the whole process by withdrawing the so-called Article 50 notice. That could even raise the chances of a second public Brexit vote and that could send sterling soaring. (For a graphic on 'Sterling positions and valuations' click https://tmsnrt.rs/2QkcsxI) 3/ QE NO MORE Thursday marks the end of an era for the ECB, which is set to formally announce the end of its three-year long, 2.6 trillion-euro monetary stimulus scheme. For markets, that's a done deal. What matters now is what the ECB does in the face of a weakening economy, global trade tensions, Brexit and Italy. Policymakers have already been floating ideas to support the economy when QE ends. One suggestion is for multi-year loans to banks. What investors appear more certain about is that the ECB will struggle to bring interest rates back up to zero percent - especially if a U.S. slowdown encourages the Fed to pause its rate-hike cycle. Money market pricing suggests investors expect roughly a 75 pct chance of a ECB rate hike in 2019. But that's down from 100 percent just a few weeks ago. (For a graphic on 'European Central Bank QE scheme' click https://tmsnrt.rs/2RzoTCh) 4/ TRADE OFF So much for the U.S.-China trade truce. If financial markets are any guide, the detente between Washington and Beijing struck over a steak dinner at the G20 in Buenos Aires barely lasted 24 hours. Fears of global trade war and economic slowdown are again driving investor sentiment. On oil markets, that signals that a 30 percent price slump since October has little hope of reversing. Oil has also had to contend with OPEC, whose initial failure to agree an output cut accelerated the price slump. Agreement over a 1.2 million barrels-per-day cuts together with some non-OPEC producers has provided a bit of respite but Brent still remains just over $60. Commodities overall are in some trouble. Copper is near three-week lows, having lost around 15 percent so far in 2018, while most base metals are down a similar amount. And the Australian dollar, a good proxy for commodities, Chinese demand and world trade, was the worst-performing major currency in the world all week. Without good news on the trade front, respite is unlikely. 5/ BEIJING COCKTAIL The U.S. trade deficit hit a 10-year high in October, and its politically sensitive deficit with China surged to a record $43 billion. So lets see how China hawks in the Trump administration react to data showing Beijing's imports from the United States shrank 25 percent from a year earlier, following a 1.8 percent annual decline in October. It appears so far that China may not be carrying out promises to import more from America and that could provide more grist for the mill - for U.S. officials pushing for more reasons to punish China and for investors skeptical of the trade ceasefire. The prospect of a Chinese growth slowdown is keeping investors edgy. So while trade contributes far less to the country's GDP than it used to, there are other data points coming up too - credit growth and retail sales among others - which should show how badly the economy is hurting from the trade war. (For a graphic on 'Chinese GDP contributions' click https://tmsnrt.rs/2RMo09m) (Reporting by Jennifer Ablan in New York, Vidya Ranganathan in Singapore; Marc Jones, Jamie McGeever and Dhara Ranasinghe in London; compiled by Sujata Rao; Edited by Andrew Heavens and Toby Chopra)