Salient to Investors:

Fed tapering, China’s credit squeeze, and Japan’s reflation ultimately prime the three biggest economies for less volatile and longer-lasting expansions, but near-term, emerging markets, commodity producers, and economies that need cheap cash or weaker currencies, including the euro area, could suffer.

Stephen Jen at SLJ Macro Partners said that parts of the world are moving, creating frictions and divergence, and more volatility for financial markets.

The IMF says the gap between developed-and emerging-market growth rates will remain close to the narrowest in a decade, at 3.8 percent in 2013, while a slowdown for emerging markets will slow global growth to 3.1 percent in 2013.

Morgan Stanley says the new environment leaves emerging countries like Brazil, Mexico, South Africa, Turkey and Ukraine, vulnerable to a sudden stop in which capital flows are thrown into reverse.

Holger Schmieding at Berenberg Bank said we are seeing significant progress in the global economy, so people need not worry because the gradual return to a more balanced global growth should be good rather than bad for almost everyone in the medium term.

Jim Paulsen at Wells Capital Mgmt says the “good” yield rise reflects mounting confidence by the Fed and investors in the US economy – since 1967, whenever the 10-yr bond yield has been below 6 percent, any increase typically has been associated with improving sentiment. Paulsen said higher interest rates should not materially impact economic activity, and the stock market may continue to provide favorable results.

Blackrock said tapering is actually healthy given that an expansion in the Fed’s balance sheet beyond $3 trillion has failed to spur much growth in credit or the economy. Peter Fisher at BlackRock says emerging markets again may suffer, as the weaker yen is drawing investment away from these countries and toward Japanese equities.

Stephen King at HSBC said the UK, Russia and the euro area periphery may suffer from unwanted yield increases as it will make it costlier for governments to finance their debt and for consumers and companies to access credit. King said a sudden spike in bond yields might send some economies off the rails altogether, and the US could suffer a backlash if trade dries up as a result.

Michael Saunders at Citigroup said less US-led stimulus could hurt economies that took advantage of easy money to run up current-account deficits and borrowing imbalances. Outside of China and the Middle East, emerging economies have aggregate current-account shortfalls of 2 percent of GDP, the highest since the late 1990s. Saunders said many emerging-market countries face the long-absent challenge of rising capital needs with worsening fundamentals at a time when global-liquidity conditions may not be easing further.

Nomura said China, Hong Kong and India are in a high-risk danger zone if a pullback by the Fed prompts investors to punish Asian countries that have weak economic fundamentals and are too slow to reform.

Oxford Analytica says Hungary and Poland are at risk because foreign investors have large holdings of local-currency debt, while Turkey is especially vulnerable because of its reliance on foreign cash to finance its large current-account deficit at a time when political tensions are rising.

HSBC and Goldman Sachs say China will grow 7.4 percent in 2013.

Shane Oliver at AMP Capital Investors said China may be trying to make economic performance more consistent and so avoid the mistake the US and Europe made in not tackling excesses before they sparked crises.

Julian Callow at Barclays said China accounts for one-sixth of global output, but a domestically driven Chinese slowdown would be much more significant than this implies, given China’s role as a major importer of commodities and capital goods, and in supporting business confidence across Asia. Callow says China accounted for 43 percent of worldwide growth from 2007 to 2012. Callow says cheaper commodity prices would be good for advanced nations but would hurt producers.

Deutsche Bank says China accounted for a quarter of worldwide demand for major raw materials in recent years. Bank of America Merrill Lynch says Chinese purchases of copper, coal, iron ore and oil are closely connected to loan-growth conditions and so are at risk if the credit crunch continues.

Larry Hatheway at UBS says companies and countries that produce materials for transportation, power and property development will be particularly hit. Over 80 percent of exports to China from Russia, Brazil, Australia, Canada and Indonesia are for domestic use. Hatheway says a slowing China would have a disproportionate impact on commodity producers and chunks of emerging markets.

Takuji Okubo at Japan Macro Advisors says Abenomics is essential and seems to be on the right track.

Lena Komileva at G+ Economics said Japan is exporting deflation risk to Europe, increasing competitive pressures when much of Europe is suffering chronic growth deficiency.

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