Our EMEA editors look at 2015 - Financial Markets, Companies

LONDON, Dec 19 (Reuters) - A look at financial markets and companies in the coming year from our Europe, Middle East and Africa editors and chief correspondents. The opinions are their own.

1)FINANCIAL MARKETS

The consensus is that global equity and bond markets will remain in thrall of the central banks and aggregate world liquidity next year, regardless of an expected Fed tightening, will be the guiding light.

Money is fungible across borders, is the idea. Whatever the Fed takes away, the ECB/BOJ and possibly the PBOC will replenish.

There may be greater volatility, certainly in emerging markets and on in foreign exchange, but the strategy of quickly buying into 5-10 percent equity pullbacks looks set to remain for a while yet.

Growth will seem scarce but global GDP should expand at a steady if sub-trend 3-3.5 percent. Risks are mostly seen to the downside given the potential for the sort of periodic financial shocks seen this month in Russia and other developing economies, but much cheaper oil adds a potentially positive wildcard to western and Japanese economies.

Investor (Other OTC: IVSBF - news) consensus is to stay with equities for yet another single digit year of gains (making the bull market one of the longest in history), to stay wary of paltry government yields and watch out for growing differential of government and corporate credits, to stay widely diversified, and above all stay long of dollars and short of energy, commodity and emerging markets en masse.

OIL

Many countries, companies, investors and traders will be asking whether oil's collapse has bottomed out and, if so, how far crude might rebound in 2015. With the Saudis playing hardball and OPEC not scheduled to meet until early June, oil markets could remain oversupplied for some time to come.

Many in OPEC will want Riyadh to end its bid to squeeze higher cost producers and lead an earlier supply cut. So, with the cost of extracting oil through U.S. shale technology having fallen sharply, the speed and scale of the rebound will depend on how generous Saudi Arabia is feeling toward fellow oil producers.

On aggregate, this should mean just a transfer of wealth from producers to consumers - but the energy price plunge has already injected significant volatility into world equity and emerging markets.

Fallout stretches from the heavy hit to market cap of the oil majors, suppliers and explorers to already-developing currency, budgetary and debt crises in the big exporting economies.

Russia and Nigeria are already in the throes of this and it could well get worse in both as hard cash reserves in both drain away. The pressure on Gulf countries will mount too - corporate debts in Dubai and elsewhere in the region could be the weak point.

A wild card for some could be pressure on long-standing dollar currency pegs in the Gulf. Nigeria's election in February is another.

The behaviour of sovereign wealth funds fueled by oil windfalls is another side effect - both their local and international investment patterns will be under scrutiny, where have they been big players and where could we see them withdraw?

As above, one real surprise could be that oil spurs unexpected growth in the euro area - something that would be totally anti-consensus from a market obsessed with deflation and stagnation.

CENTRAL BANKS

The Federal Reserve is expected to bite the bullet and raise rates in 2015 for the first time in a decade, regardless of oil-depressed inflation.

Markets will ebb and flow on this all year as usual. Growing expectations of a postponement to 2016 as recently as November changed dramaticallly again recently and mid-2015 is again the 'best guess' for the first rate hike in more than nine years.

Japanese Prime Minister Shinzo Abe's resounding electoral endorsement means BoJ stimulus will likely continue at full tilt and the ECB is now widely expected to shift to full-blown sovereign QE in Q1, despite internal opposition from Germany and others.

The market assumption is that you can't engage in QE half cocked - it has to been seen through to sustainable, successful growth. The thinking on the ECB is that it is now trapped into going there, and disappearing bund and even peripheral bond yields (except Greece) point to that.

The biggest market fallout, and most overwhelming consensus trade, is that the U.S. dollar must move ever higher in that scenario and this reinforces pressure on oil and commodity prices and emerging economies with heavy corporate dollar debts.

There is a big market risk here, and another source of potential volatility, is that the dollar bull case is now a crowded trade and, if the Fed and a pre-election U.S. Treasury baulk at a severe dollar strength enough to delay tightening and raise policy flags, a no-show on the dollar could be as dramatic as the bum call on U.S. Treasuries in 2014.

RUSSIA

A meltdown is already well underway and remains a huge wildcard for the year ahead for local and global markets, if only because it's so hard to predict.

The current fear this week is of an economic crash in Russia, double digit inflation, currency collapse, draining reserves which are much lower than they seem, corporate lending stress and mammoth capital flight.

A collapse of a top-10 world economy is a mammoth risk, not least to the euro zone and eastern European economies as well as ambiguous impacts on the likes of Western property markets.

Ukraine's finances are also in the mix - dependent hugely now on western support, a new donors' conference to bridge gaps in the existing IMF programme and the lingering market risk of wholesale debt restructuring and default.

EURO ZONE

The ECB QE debate is central and markets are already 90 percent priced for this in Q1.

But it also depends on how the fiscal and banking legs of the problem work out - will the Germans agree to loosening their own purse strings and accept that the lowest long-term borrowing rates in history provide a moment to re-engage with fiscal stimuli on top of the ECB action to prevent deflationary spiral.

Any serious doubt about the ECB stance or governmental growth strategy could see markets attempting to price credit risk again rather than central banking and growth support.

CHINA SHOCK?

This remains a massive risk for all world markets.

How is China managing its slowdown and how integrated and exposed are global companies and economies? What are the risks that China joins the currency war and allows a sharply weaker yuan? What's the impact on massive Chinese corporate borrowing in dollars? How exposed are world banks and lenders?

2) COMPANIES

With companies performing a little better than two years ago, there will be less incentive to hold onto cash piles. But big deals will still be funded more by debt and equity and cash will remain as a liquidity buffer and a prop for debt refinancing.

More cheap money via QE would only reinforce the trend. An M&A boom driven by cheap debt and scarce revenue growth is likely to continue, driven by changes in technology and consumer habits, tax reform and the diverging performance of big economies.

Companies that spent heavily to expand in emerging markets will ride a roller coaster of currency volatility, slowing growth and ripples from the Russia crisis, albeit with some help from a weak euro and a strengthening U.S. economy.

-- Economics of frugality: companies will fight for a growing pool of bargain-hunting consumers with more aggressive marketing, bundled services, distinct product lines and a wider variety of cheaper goods, sacrificing some margins to keep the top line growing.

-- Differentiated advertising. Companies are shying ever further from a one-size-fits-all approach, drawing upon big data analysis for more content marketing and community building to save money and tailor particular appeals to certain demographics.

-- Risks. As some countries move more aggressively on reforms to kick-start investment and job creation, those that don't are taking a big risk.

ENERGY AND MINING

Low commodity prices will add urgency to the search for lower costs through lay-offs, scaled-back projects, lower capital expenditure and price cuts by service and equipment suppliers.

Once oil prices stabilize, the pressure to maintain dividends will force some of the less successful oil producers into the arms of rivals. Enduring cheap oil will impact renewable power and the industrial energy mix and cut the cost of oil-based raw materials from plastics to petrochemicals.

In Russia, oil companies will struggle to repay debt given the steep rouble devaluation.

There is always the chance that some foreign oil companies will pull the plug if sanctions pressure grows and prices stay weak, but not BP, which is betting on the long term: Putin will not be there forever.

TELECOMS

The sector is on the cusp of more M&A activity after one of its busiest years. Telecoms companies are likely to pursue content providers as faster data speeds make media content the major competitive advantage.

Companies will attack a tough pricing environment by combining fixed and mobile broadband and TV to offer more convenient, seamless services.

Telecom companies are also turning their attention to payments as the rise of the smartphone, contactless payment terminals and regulatory change force banks to open up their networks and set the stage for Apple Pay to enter the market.

TECH

More multi-billion dollar deals are expected by U.S. companies looking to pick up mid-sized European players in semiconductors, enterprise software and business services.

Some big U.S. tech companies are set to split up in the coming year which could lead to reconfiguration in computer software and services. Alibaba, Samsung and other Asian companies with deep pockets may make interesting add-on technology deals in Europe.

Politicians, regulators and consumer and privacy groups, meanwhile, are all joining the anti-technology crusade under the banners of privacy, copyright protection and anti-trust.

The Apple CEO's recent warning that "when an online service is free, you're not the customer, you're the product" spells trouble for companies that depend on online advertising, 'personalisation', 'geo-location,' and privacy-invading social networks.

PHARMA

2014 was the year of the big deal that didn't happen: Pfizer didn't manage to land AstraZeneca (NYSE: AZN - news) and AbbVie (Xetra: 4AB.DE - news) 's planned acquisition of Shire (Xetra: S7E.DE - news) unraveled.

The pressure for deal-making continues as companies seek to focus and achieve greater scale in an increasingly cost-conscious health industry. But the practice of tax inversion by U.S. companies is now uncertain, leaving a key driver of earlier transactions in limbo.

The most exciting area of drug development is the prospect of fighting cancer, as drugs that boost the immune system produce more pivotal results in clinical trials and their potential extends well beyond melanoma (the first use) into lung cancer in particular, opening important market opportunities for Roche and AstraZeneca in Europe.

AUTOS

Cheap oil poses a serious headache for an industry that's been forced to invest in engine downsizing and other costly technologies to reduce fuel consumption and comply with CO2 limits.

As fuel gets cheaper, consumers will tend to choose bigger vehicles, lifting average emissions. It will get harder to persuade consumers to cover the additional cost of fuel-efficient powertrains including hybrids.

In Russia, companies like Renault-Nissan have been protected by their heavy investments in local production and supplier networks while others suffer from currency headwinds affecting imported vehicles and parts. But if the economy implodes, there will be no winners.

RETAIL AND CONSUMER GOODS

The big-box shop format will remain under pressure from the rise of e-commerce and convenience but traditional retailers will fight back against pure online by pushing their bricks-and-mortar networks as a competitive advantage.

Retailers will continue to press for lower prices and more reactive supply chains, pressuring the "defensive" premium enjoyed by the bigger consumer goods makers.

Consumer goods makers will seek new brand strategies to adapt to multi-channel retail.

Anheuser Busch InBev could make a move for SABMiller (LSE: SAB.L - news) in deal that would top $100 billion. Large consumer conglomerates will continue to unload underperforming businesses to focus on higher-margin areas such as consumer health.

UTILITIES

China's push into European utilities could be a big driver for M&A. CGN and CNNC need to decide what size stake to take in Hinkley Point, China State Grid is set to continue its expansion in the Mediterranean by bidding for Greece's ADMIE, while other players like Shanghai Electric and China Three Gorges also keep looking for new investments.

Floating offshore wind is the next frontier in renewable energy. In 2015, floating offshore will move from single-turbine prototypes to small experimental wind farms in Portugal, Norway and the UK, while France is looking at launching a floating offshore tender.

AEROSPACE/AIRLINES

The year of the supply chain lies ahead. Can planemakers and especially their engine suppliers deliver on the start of a 2-3 year ramp-up of new or upgraded models on time, cost and quality?

Stakes are high, especially for Airbus as room for error in delivering huge backlog of orders is tight.

On safety, the lessons of MH370 and MH17 may change the industry. Tracking and intelligence sharing remain hot issues for 2015 but there is slow progress.

A big safety meeting will be held in Montreal in February.

(Edited by Jeremy Gaunt)