Recent economic news out of China confirmed the country has still a long and bumpy way to go before the “historical” transition from an investment driven economy to a consumer driven economy.

• Industrial production rose by 5.4 percent year-on-year (y/y) in January (below consensus of 5.6 percent) and was down from growth of 5.9 percent y/y in December and which was the weakest increase since November 2008.
• Retail sales rose by 10.2 percent y/y over the same period and which was the weakest since May 2015 and also below expectations of a 10.8 percent increase.
• Fixed-asset investment rose by 10.2% y/y in January, which was above expectations for a 9.5 percent increase, but remained at the bottom of the long-term downward curve that hit its high in the month of June 2009 at 33.60 percent y/y.
• The weekly published China Containerized Freight Index (CCFI), which tracks contractual and spot-market rates for shipping containers from the major Chinese ports to 14 regions in the world, dropped last week another 4.1 percent to 705.6, which was its lowest level ever.

Investors seem less worried about what happens in the real world. They seem to be happy with what IMF’s executive director for China said about the value of the Chinese currency and that his country has all the necessary instruments to manage risk a flexible exchange rate. He added he did not expect a “very dramatic” depreciation of the yuan (CNY).

His statement could easily imply a 7-handle for the yuan against the dollar exchange rate, which would represent a yuan depreciation from its present levels of about 8 percent before the year is out. Such a reality would cause "unwelcome" volatility in many places.

In Europe, we got the German "Super Sunday" state elections in 3 of Germany's 16 federal states whereby Chancellor Merkel suffered a serious setback as many voters rejected her migration policies and the anti-foreigner political party “Afd,” which stands for in German “Alternative für Deutschland” or the Alternative for Germany and is a right-wing populist and Euro-skeptic political party that was founded in 2013, garnered significant more votes than most opinion polls had projected.

What is important for investors: it is very unlikely that Sunday’s protest vote, because that’s what it really was, is unlikely to put Merkel’s job as German Chancellor at risk.

To the many who call Merkel the “Indispensable European,” I think they miss the actual fundamentals of German politics which are aimed at Pro-euro, Pro-EU and Pro-NATO and which is shared by all parties of the political mainstream.

So, whoever might “hypothetically” succeed Merkel will more than probably pursue the same policies for Europe, the euro and NATO.

With or without Merkel, I can't see Germany making a serious U-turn and for investors the dangers will probably not come out of Germany itself, which cannot be said for all the other euro area state members.

All this doesn’t mean the euro area won’t face harsh challenges that “could,” which doesn’t mean “will,” play havoc over the near to median term caused, albeit only in part, by the euro area’s obvious lack of coherence in decision making going from its “refugee policies” to the absolutely necessary, but still lacking “structural reforms.”

For the investment world, I think more serious risks could be lurking in case Britain should decide for a "Brexit" in June’s referendum on staying-or-not in the European Union (EU).

In the U.S., the main event of the week will be Wednesday’s FOMC decision on the Fed's monetary policy and whereby it will almost certainly maintain a status-quo.

Let’s hope that Fed Chair Janet Yellen will then use her press conference to enlighten the investor’s community about what has changed since December and how she sees the Fed’s policy path from hereon and specifically why.

Etienne "Hans" Parisis is a bank economist who has advised global billionaires and governments on the financial markets and international investments. To read more of his articles, GO HERE NOW.