Eyes on China data, rate meetings

By Catherine Evans

LONDON (Reuters) - China's battered stock markets reopen on Monday after a two-day public holiday and before a monthly data dump that could reinforce fears of a hard landing, rattling the global economy.

Key numbers next week include trade data on Tuesday -- expected to show both exports and imports falling again in August -- and inflation on Thursday. Signs of further weakness in the world's second-largest economy would cement expectations of fresh stimulus measures from Beijing and keep markets on edge.

The International Monetary Fund warned Group of 20 finance ministers and central bankers this week that China's slowdown and rising financial market volatility, some measures of which are close to levels seen during past crises, have boosted risks to global growth. Its staff cited a mix of potential dangers such as depreciating emerging market currencies and tumbling commodity prices.

The G20 is discussing those developments in Istanbul but its meeting, which ends on Saturday, is unlikely to result in specific measures to address the turmoil in Chinese markets or its impact elsewhere.

Japanese Finance Minister Taro Aso said this week that a "frank debate" was needed about what is happening in the Chinese economy, including structural problems such as rising bad debts, but Beijing is not likely to be singled out for criticism.

A draft communique seen by Reuters on Friday addressed last month's surprise devaluation of China's yuan currency only indirectly, committing members to move towards more market-determined exchange rate systems while refraining from competitive devaluations. It also avoided saying a U.S. rate rise would be a risk to growth, as some emerging market officials had wanted.

Beijing had denied the move is the start of a round of competitive currency devaluations by governments to help exporters although officials in Washington, which has long argued for a more market-determined yuan exchange rate, greeted the shift with some scepticism.

Euro zone finance ministers also meet informally in Luxembourg on Friday, while APEC finance ministers and central banks will gather in the Philippines.

The market turbulence has clouded expectations for a U.S. interest rate rise later this month, the first for nearly a decade, although a lower-than-expected monthly jobs reading on Friday was largely shrugged off by markets.

Nonfarm payrolls increased 173,000 last month, the smallest gain in employment in five months and well below a 220,000 forecast, but a fall in the unemployment rate and accelerating wage growth kept the prospect of a hike on the table.

Federal Reserve rate-setters meet on Sept. 16-17.

U.S. markets will be closed for Labor Day on Monday.

Next week the Bank of England will also consider a first rate rise from crisis-era lows. Other central banks taking interest rate decisions include South Korea and the commodity-driven economies of Canada, Russia, and New Zealand.

With no chance seen of a Bank of England hike on Thursday, the focus will be on the minutes of the meeting and how rate-setters who split 8-1 against a hike in August voted.

Although Governor Mark Carney has said the BoE could "look through" the temporary disinflationary impact of lower Chinese demand for commodities, soft UK data has prompted markets to move back the expected timing of a rate hike to April or May.

Industrial output and trade data will give an indication of how Europe's big economies are coping with the slowdown in emerging markets, which European Central Bank chief Mario Draghi blamed on Thursday for cuts to the ECB's growth and inflation forecasts.

Ominously, he also warned that the projections were based on data gathered before China's stock market started to melt down.

Amid fears that central banks are running out of ammunition to deal with crises after years of near-zero interest rates and monetary stimulus, a downbeat Draghi also signalled that the ECB is likely to increase its already huge asset purchase programme.

(Editing by Ruth Pitchford)