Markets are now pricing in a US bailout of Fannie Mae and Freddie Mac. Consumer spending is weak, Dell's profits were ominous and non-farm payroll numbers due out this week are unlikely to bring much joy. The debate over whether emerging market inflation will finally succumb to slowing growth continues this week, with the added worry that analysts say rising spreads are giving rise to fears that the credit crisis is spreading to Australia, China, India and South Korea. Most economists now seem to believe that emerging-market inflation has peaked and that price increases will now slow. Singapore's trade-dependent economy shrank 6 per cent in the second quarter and some say any uptick in China's growth and subsequent demand for commodities is unlikely to gain any traction until the second half of next year. While most economists now believe China will seek to stimulate domestic growth to ward off a slowdown, a debate is now emerging over whether that means they will allow the renminbi to appreciate to curb inflationary pressures, or now that inflation seems to have peaked, keep the RMB from appreciating to give some relief to basic export industries such as textiles. With further gloom spreading from Wall Street over the health of the global economy, hedge funds are likely to cut risk exposure by continuing to unwind emerging markets positions. To the extent that these represent carry trades, this will be negative for emerging market currencies and positive for the dollar as well as the Japanese yen. Foreign investors were net sellers of $1.1 billion in Asian stocks last week, mirroring the exodus in local markets. This will put heavily indebted corporations increasingly in investors' crosshairs. While there are some signs that emerging market companies are able to find local financing, credit and capital markets appear to be drying up everywhere. The UAE's most heavily indebted company is Taqa, but with its sovereign backing, it should be unphased. Next on the list is Tamweel, whose stock price has already been battered by its former CEO's involvement of a corruption investigation. There is, however, a rear-guard attack being mounted by the Decouplers, who say the market turmoil reflects only the disintegration of the West's heavily debt-overdependent capital markets, and does not fully take into account the growing trade and investment links between the so-called emerging markets. High oil prices, for example, have sent Saudi export earnings to a record, giving the kingdom more money to buy manufactured products from China and elsewhere, helping to compensate for lower export demand from US consumers