The spectre of a full-blown trade war has reared its head. U.S. President Donald Trump has mooted steep tariffs on steel and aluminium imports, declaring that "trade wars are good, and easy to win".

Market reaction has been swift, with heavy stock market falls, especially in steel producers' shares - some names such as ArcelorMittal have tumbled as much as 5 percent. As for policy reactions, the European Union has pledged firm counter-measures, China urged Trump to show restraint, and Canada, the biggest supplier of steel and aluminium to the U.S., said it would retaliate if hit by duties.

The sustained multi-year rebound in global trade has driven much of the upswing in equities. Trade is currently expanding at annualised rates of more than 4 percent, the strongest since 2011.

Now with trade war possibly brewing, global stocks are on course for a hefty weekly loss of around 3 percent. Next week could bring more.

(To view a graphic on U.S. Steel, click: http://reut.rs/2CTE3tV)

2/ BUMPY ROAD IN ITALY

Italy goes to the polls on Sunday and with the worst case scenario of a euro-sceptic government looking remote, investors have been relaxed. In fact before Friday's trade tantrum, Italian shares had risen 2.5 percent year-to-date, bucking broader European equity losses.

Still, with no clear winner expected and no immediate clarity on the new government's make-up, next week may bring turbulence. Atop equity investors' watch-list is media firm Mediaset, which will get a boost if its owner, right-wing leader Silvio Berlusconi, does well in the election. A good result for the 81-year-old ex-premier could give Mediaset more bargaining power in a long-standing pay-TV dispute with Vivendi.

Financials, a proxy for political uncertainty given their big sovereign bond holdings, may also see volatility, especially smaller names such as Banco BPM or UBI Banca with little or no foreign exposure. State-run firms such as Eni and Leonardo will face worries over management if the anti-establishment 5 Star movement scores strongly in the election.

Bond investors meanwhile appear sanguine - Italy's 10-year yield touched a three-week low on Friday and the yield premium over German peers was the tightest in two weeks.

(To view a graphic of Italian stocks pulling ahead before Sunday's election, click: http://reut.rs/2CQ7LQF)

(To view a graphic - Italian election no sweat for bond market, click: http://reut.rs/2FehFAS)

3/ECB, BOJ MEETINGS

A big week for central banks, with the ECB and Bank of Japan both deciding on policy. Neither is expected to change rates or alter their QE programmes, but that doesn't diminish their importance. They are pumping more stimulus into the global system than anyone else, yet both are making noises about wanting to bring their extraordinary policy measures to an end.

Trouble is, even though economic growth is strong, inflation continues to undershoot. Recent market turbulence, the strong euro and a dip in both headline and underlying inflation should ensure ECB officials hold off signalling the end of asset buys until the summer. The BOJ is juggling similar issues and the yen's recent surge, especially, will be unnerving.

4/JOBS FOR ALL

The U.S. unemployment rate has held at 4.1 percent since October and is currently at a 17-year low. So will it go any lower? February jobs data is due on Friday March 9, with the latest Reuters poll of economists showing a consensus on a 4.1 percent reading.

But is there any more labour left?

U.S. Federal Reserve officials consider the labour market near or a little beyond full employment. The U-6 rate, which measures discouraged workers who quit looking for a job and part-time workers looking for permanent employment, is hovering at 11-year lows. Weekly jobless claims are the lowest since 1969. With tax cuts likely to juice up growth, the Powell Fed may raise interest rates more aggressively.

So four hikes this year instead of three? Maybe. But Fed chief Jerome Powell said on Thursday he saw little evidence of the economy overheating or of a decisive upward move in wages, and nothing to suggest wage inflation was about to take off. A core PCE of 1.5 percent suggests there's still some slack in the economy too.

(To view a graphic on U.S. unemployment rate w/U-6 rate and wage growth data, click: http://reut.rs/2FbtmIx)

5/CHINA CONGRESS

China kicks off its annual National People's Congress on March 5 with 3,000 delegates gathering in Beijing for the two-week session. Participants in the parliament will have more on their minds than the 2018 economic growth target; this will be kept steady around 6.5 percent, sources say.

For one, President Xi Jinping has already set the stage to rule well beyond his current five-year term, possibly indefinitely. Parliament is expected to ratify this, stoking confidence in the reform process but also worries about Beijing's commitment to free market principles.

The government recently took control of major insurer Anbang Insurance Group and is investigating the chairman of CEFC China Energy, a conglomerate with global ambitions. Some China watchers reckon that given financial system problems, the government may assume control of more firms.

Investors will also want to see how the world's largest steel producer might react to Trump's plans to impose heavy import tariffs on steel and aluminium.

What of markets? Money markets and yuan have been steady but Hong Kong-listed stocks have seen heavy selling by mainland investors <.HSCE>. Reasons put forth for the exodus of Chinese money from Hong Kong markets includes concerns over Beijing's tough crackdown on big-spending, high-profile global conglomerates and the Federal Reserve's policy hawkishness.

(To view a graphic on China National Congress, click: http://reut.rs/2F4UUQC)

(Reporting by Danilo Masoni in Milan, Daniel Bases in New York, Vidya Ranganathan in Singapore, Karin Strohecker and Jamie McGeever in London; Editing by Gareth Jones)

Stocks treated in this article : Vivendi, Mediaset