GRAPHIC-Take Five: A macro-packed punch for markets

March 10 (Reuters) - U.S. inflation data, a European Central Bank meeting, a look at the health of China's economy and a UK budget could provide direction for markets unsettled by a slide in bank stocks.

Here's a look at the week ahead in markets from Kevin Buckland in Tokyo, Ira Iosebashvili in New York and Dhara Ranasinghe, Karin Strohecker and Naomi Rovnick in London.

1/ THE PRICE IS RIGHT

U.S. inflation data have been pivot points for markets and Tuesday's report will likely be consequential as investors gauge whether the Federal Reserve will return to the jumbo-sized rate hikes that shook markets last year.

Fed Chairman Jerome Powell told U.S. lawmakers this week that the central bank may to take interest rates higher than previously anticipated if the data continue to show that inflation remains hot despite a barrage of rate hikes.

That could be bad for investors hoping that U.S. stocks continue their early-year rally, which has melted away in the face of rising Treasury yields and renewed Fed hawkishness. For , markets are preparing for higher rates. Investors on Thursday priced in a roughly 70% chance that the Fed will raise rates by 50 basis points at its March 22 meeting.

Economists polled by Reuters expect consumer prices to have risen by 0.4% in February, after rising 0.5% in January.

2/ HIGH 5?

Hints on whether China's 5% growth target is as modest as many suggest come on Wednesday with the release of the first retail and factory data of the year, two days after the week-long National People's Congress wraps up.

The finale of the annual rubber-stamp parliament saw Xi Jinping secure a precedent-breaking third term as president on Friday.

Premier-in-waiting Li Qiang, best known for overseeing Shanghai's stifling COVID-19 lockdowns, is poised to be confirmed on Saturday to China's second-highest post.

Li's task will be guiding China's post-pandemic economic re-emergence. China grew just 3% in 2022, its worst showing in decades.

December data wasn't so hot for retailers, as a surge in infections following the rollback of pandemic-related curbs kept people at home. Lego is optimistic: Most of the 145 stores it plans to open this year will be in China.

3/ HOW HIGH?

The European Central Bank has raised rates by 3 percentage points since July to 2.5% and looks set for another half-point increase on Thursday.

A surprise surge in underlying euro area inflation last month has policymakers fretting that price pressures could be even stickier than feared. Austria's central bank chief Robert Holzmann wants half-point rises at each of the four meetings.

Markets, ready and willing to take a punt on how high rates will go, have rapidly positioned for a move towards 4% by year-end. Morgan Stanley and BNP Paribas reckon this is where rates will peak.

Expect ECB chief Christine Lagarde to be put on the spot on how high rates will go. Bond markets have already readjusted to a hawkish path ahead, so there shouldn't be too many surprises. Right?

4/ BUDGET RESPONSIBLY

Britain's finance minister Jeremy Hunt delivers his Spring Budget on March 15. After market mayhem in September as Hunt's predecessor Kwasi Kwarteng and former Prime Minister Liz Truss unveiled lavish tax cuts, forecasters expect Hunt to prioritise keeping public finances steady, resisting giveaways that could destabilise sterling, stocks or gilts.

So, traders' main focus is on growth and borrowing forecasts to be released alongside the budget.

The Office for Budget Responsibility has predicted 1.3% GDP growth for 2024. The Bank of England forecasts a slight contraction. An OBR downgrade might affect sterling GBP=, but the pound is moving mainly on interest rate differentials, with U.S. rates FEDWATCH expected to rise further than in the UK.

UK public borrowing plans are expected to fall, potentially supporting gilts. An expected extension to household energy bills support may be viewed as inflationary, however.

5/ EMERGING PAIN

Emerging markets face their demons as traders mull whether the Fed will lift rates as high as 6%, a level many see as testing the pain threshold for developing economies.

It's just the scale of the hikes, but also the speed that makes uncomfortable reading for those holding stocks, bonds and currencies from emerging economies, which often buckle when global rates rise.

Riskier, more fragile emerging markets, especially those with twin deficits, could feel the heaviest punch if the Fed goes all the way to 6%. China's reopening could provide a cushion to some emerging market assets.

A hawkish Fed also poses a conundrum for emerging central banks who beat major peers in hiking rates and are front runners in cutting them - Hungary, Poland, Chile or Brazil for instance. But the timing of any such moves looks increasingly in flux.

(Compiled by Amanda Cooper; Graphics by Pasit Kongkunakornkul, Kripa Jayaram and Vincent Flasseur; Edited by Shounak Dasgupta)

((amanda.cooper@thomsonreuters.com; +442031978531; Twitter: https://twitter.com/a_coops1))