FTSE 100 
1/HEY, BIG SPENDERS?
The recent U.S. tax changes are estimated to have reduced annual personal taxes by $115.5 billion. That means more money in the pockets of consumers, who drive two-thirds of the economy. Now that the personal income tax season has come and gone, and the bulk of taxpayer refunds has found their way into people's pockets, did consumers spend more?
In fact, economists polled by Reuters see April retail sales, due on May 15, growing just 0.4 percent, moderating from March's 0.6 percent rise. But excluding the automobile sector, sales are expected to increase 0.5 percent, after 0.2 percent in March.
Economists reckon the data will help shape the debate over how many times the U.S. Federal Reserve will raise interest rates this year. Bond markets currently are betting on at least two more increases. The combination of extra spending and tax cuts frontloaded the positives, and now we wait to see if it translates into robust economic performance.
Graphic: U.S. retail sales and sales ex-autos - https://reut.rs/2KciTv5
2/NOISE FROM THE BLACK STUFF
Oil prices are at the highest since 2014 and the surge shows no sign of waning. In fact, $80 a barrel is within sight for Brent crude.
The U.S. decision to pull out of the Iran nuclear deal and re-impose sanctions has pushed Brent 3 percent higher this week, its biggest of five consecutive weekly rises. It is now up 60 percent over the past year.
Iranian oil exports should start falling as the new sanctions take hold. Even if other OPEC countries manage to fill that gap, the global oil market is still pretty finely balanced. Brent could reach $90 per barrel in the second quarter next year, Bank of America Merrill Lynch predicts, adding that $100 cannot be ruled out.
The question is now how this will impact inflation and central bank policy. Inflationary pressures in the developed world remain muted, but economic textbooks suggest not for long.
Graphic: Brent crude oil - https://reut.rs/2KfF4R7
3/ EUROPE'S M&A FIZZ
M&A action has been hotting up in Europe, with April recording the highest value of monthly deals in 10 years, according to Thomson Reuters data.
This week, we've had a private equity firm agreeing to buy Zoopla-owner ZPG, sending its shares to a record high and lifting other online consumer-focused firms such as Auto Trader and RightMove.
Japan's Takeda is buying Shire for $62 billion and U.S. cable giant Comcast is seeking approval for its bid to buy British pay-TV group Sky.
The UK, in particular, is drawing attention from foreign buyers due to the still-depressed levels of the pound and the fact that stocks trade at a discount to their long-run average on a 12-month forward PE basis.
Credit Suisse Wealth Management added UK equities to their most preferred markets, while Bank of America Merrill Lynch say they are rotating from Europe to the UK.
The Euro Stoxx index <.STOXXE> is close to fully regaining all the ground lost during the February volatility shock, while the UK's FTSE 100 <.FTSE> is flat on the year, after being down as much as 10 percent some weeks back. Deal-making activity could provide the lift into positive territory for both benchmarks.
Graphic: European monthly M&A - https://reut.rs/2rA943p
4/MARRIAGE OF CONVENIENCE?
After weeks of wrangling, Italy may soon get a new government made up of the far-right League and the anti-establishment 5-Star Movement. But for markets, which have so far taken Italian political risks in their stride, a League/5-Star tie-up is the worst-case scenario; both groups are hostile to EU budget restrictions and have made electoral pledges that would cost billions of euros to implement.
No wonder the cost of insuring Italian debt against default have crept up, bond yields
The Italian/German bond yield gap
After all, a week is a long time in politics and the two parties are yet to agree on who will be prime minister. And a 5-Star member has even hinted the premier may be an independent figure not affiliated to either group.
Graphic: Waking up to Italian political risk - https://reut.rs/2KcwsdY
5/BACK TO THE 90s
Malaysian markets re-open next week after investors had two days to chew on a shock election result that saw incumbent prime minister Najib Razak lose to 92-year old Mahathir Mohamad, the end of an uninterrupted six-decade run for the ruling coalition.
Offshore markets are uneasy: the ringgit lost 4 percent on the non-deliverable forwards market
The fear is that Mahathir, who was in power for 22 years until 2003, including during the late-1990s financial crisis, will fulfill pledges to remove the goods and services tax, scrap toll fees, reinstate fuel subsidies and renegotiate Chinese investment deals.
That would hit budget revenues. Mahathir has also vowed anti-corruption reform, but whether better governance can be achieved remains to be seen. For now, uncertainty takes center stage. - Veteran Malaysian leader Mahathir scores shock election win- Malaysian markets leery over Najib's defeat, Mahathir's return- Mahathir's shock Malaysian election win raises populist economics spectre- Malaysia central bank holds key rate as election shock spurs economy concerns.
Graphic: Malaysia's election shock - https://reut.rs/2rx4vGO
(Reporting by Daniel Bases in New York; Marius Zaharia in Hong Kong; Jamie McGeever, Dhara Ranasinghe and Kit Rees in London; compiled by Sujata Rao; Editing by Kevin Liffey)
