So when would it be appropriate for the Fed to cut rates?

Sure, equity trading volume was low in Asia yesterday. But it

1/THE FIRST CUT...

With President Donald Trump's trade policies heightening fears of a U.S. recession, expectations of a Fed rate cut have dramatically increased in the past month. Money market pricing became even more aggressive after Federal Reserve Chair Jerome Powell threw open the door to a cut, promising on June 4 the Fed would act "as appropriate" to address risks from the trade dispute. It was the second sudden shift in the Fed's tone, after January when it abandoned its bias toward steady tightening.

So when would it be appropriate for the Fed to act?

The Federal Open Market Committee might answer that question at its June 18-19 meeting. Money markets price a cut by July; by end-2019 they reckon the Fed will have cut twice at least.

The CME Group's FedWatch tool shows traders assign an 88% probability of a cut in July. They put chances of a June cut at 23%, up from around 17% a week back. Vanguard, one of the world's largest asset managers, is one investor who reckons the Fed will announce an "insurance" interest rate cut on June 19.

2/...WILL OTHERS FOLLOW?

If the Fed's pivot to full-on dovishness in a short space of time was remarkable, the U-turn by other G10 central banks is as astonishing. From Canada to Japan, developed countries are now seen cutting interest rates.

Markets' eyes will be firmly fixed on the ECB's annual three-day shebang in Sintra and policy meetings in Japan and Britain. It was in Sintra two years ago that Mario Draghi sparked a bond selloff by remarking on the euro zone's "strengthening and broadening" economic recovery. Sadly, that was a false alarm; two years later Draghi is winding up his term with little sign of growth or inflation and a real likelihood of more rate cuts.

Similarly, the Bank of Japan has watched its 2% inflation target recede into the distance. As the Fed gears up to cut rates, the BOJ may have no choice but to follow suit, possibly as early as September. It could cut rates to minus 0.3% from minus 0.1%, some predict. Bank of England policymakers have been at pains to stress rate hikes are still possible. The problem is that no one believes them: markets are pricing rate cuts by next June.

Upcoming meetings will be mostly about signaling. But they may show if policymakers intend to eventually walk that talk.

3/IT ALL DEPENDS...

Despite a run of weak data and simmering trade tensions, the jury is out on whether the growth outlook is dire enough to merit immediate central bank action. But markets' rate-cut fixation means the upcoming data deluge takes on greater significance than usual.

China's May house price data and Germany's closely-watched ZEW sentiment index are out Tuesday. Wednesday will bring Japanese export figures and UK inflation and on Thursday, we get the U.S. Philly Fed business index, British retail sales and an early reading of euro zone consumer confidence for June.

The week ends with a key snapshot of the world's economic health - the Purchasing Managers' Indexes (PMI) of business activity. U.S. manufacturing PMIs are still holding above the 50-mark that indicates an economy is growing. A move below is what everyone is watching for.

4/CHINA-HONG KONG (DIS) CONNECT

Perhaps nothing sums up the global zeitgeist better than the recent scenes in Asia's leading finance hub, Hong Kong, where there were clashes between protesters and police but also it seemed between two visions of the world.

Hong Kongers plan to continue protesting a proposed bill that allows people to be sent to mainland China for trial. Opponents of the bill highlight risks to human rights protections as well as the autonomy of Hong Kong's legal system, one of its main competitive advantages.

The fear is that retail sales and tourism receipts could drop as seen during the 2014 "Umbrella" protests. But a greater problem would arise if the United States decides Hong Kong is not autonomous enough to justify the special treatment it receives -- its current status shields it from import tariffs, visa rules and other curbs that apply to mainland China.

Spiraling cash demand due to the standoff has pushed interbank rates to decade-highs while HK stocks have tumbled. The backwash for Beijing too may be unpleasant -- Hong Kong is a useful channel for Chinese trade, IPOs and investment. Some $1 trillion in trade passed through it last year and the Stock Connect program with Hong Kong contributes to turnover on mainland exchanges. Watch those protests.

5/IF AT FIRST YOU DON'T SUCCEED...

Voters in Turkey head back to the polls on June 23 for a re-run of the Istanbul mayoral contest. Authorities scrapped the result of the original March 31 vote. That was lost by President Tayyip Erdogan's candidate, after his AKP Party said the result was invalid. The ousted mayor Ekrem Imamoglu, who represents the main CHP opposition party disagrees, and calls the election a "battle for democracy".

Indeed, the outcome of the vote will be a good indication of the future direction of policy in Turkey. A victory for the CHP could bolster calls for reforms to revive the economy, while proving potentially damaging for Erdogan's authority. But an AKP win could allow Erdogan to tighten his grip on power.

Raising the stakes further is that the election takes place at a testing time -- tensions are running high between Ankara and Washington over the purchase of Russian S-400 defense systems. U.S. threats of sanctions have caused a selloff in the lira while risk-insurance costs for Turkey are on the rise. - Reuters