May 20 – A look at the day ahead from Danilo Masoni.

Over the last 24 hours investors have been served with a cryptocurency sell-off and hints from the U.S. Federal Reserve that it could soon talk about starting to scale back stimulus.

It’s all made for a more sombre mood, as markets chew over the risks of a bigger pullback. The crypto crash hit equities hard, pumped up volatility gauges, and briefly fuelled safe-haven demand for bonds.

That bond bid evaporated however after the release of the Fed minutes; they revealed several officials had felt it might be appropriate to “begin discussing a plan for adjusting the pace of asset purchases”. Ten-year U.S. yields promptly turned tail, rising towards 1.7%. Wall Street closed lower.

Some calm has returned, with European stock futures pointing higher following one of their worst sessions this year and Wall Street looks set to follow. One source of comfort could be the fact the Fed meeting was held before the dismal April jobs data.

The word “transitory” appeared eight times in the minutes in a reference to inflation, Natwest analysts point out.

The fact remains though that world stocks are on course for a monthly loss for the first time since January.

On the macro front, the slew of strong data continues. Japanese exports grew the most since 2010 in April while capital spending perked up on surging global demand for cars and electronics.

Citi’s economic surprises for the U.S., Europe and Asia have all been running in positive territory for over eight months.

In corporate news, shares in Kingfisher and Bouygues are set to rise after their quarterly updates.

Finally, Bitcoin has bounced 7% but remains 39% off the peaks hit five weeks ago.

Key developments that should provide more direction to markets on Thursday:

* China keeps lending benchmark rate unchanged for 13th straight month

* Euro zone inflation surge is temporary -ECB’s Schnabel

* German PPI

* BoE Deputy Governor Jon Cunliffe 0900 GMT

* ECB President Lagarde 1200 GMT

* IMF’s Managing Director Kristalina Georgieva

* Bank of Canada Governor Tiff Macklem presser 1500 GMT

* Federal Reserve: Dallas Fed President Robert Kaplan

* South Africa central bankmeeting

* Russian and U.S.foreign ministers Lavrov and Blinken to meet

* Auctions: French 15Y and 10Y; US 10Y TIPs

(Reporting by Danilo Masoni; editing by Sujata)

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