Following are five big themes likely to dominate thinking of investors and traders in 2010 and the Reuters stories related to them.

HOT STOCKS

1/ HAVEN'T YOU HAD ENOUGH, SIR?

The punchbowl is still pretty full but the hosts are pointedly looking at their watches. Both the Federal Reserve and the European Central Bank have given details recently of how and when they will withdraw the extraordinary stimulus measures which have boosted assets this year. Long before they worry about rate hikes, markets will need to contend with still ample liquidity draining away. This will expose potential problems that were hidden beneath the flood, such as the fiscal fitness of some euro zone countries, Britain and even the United States, and the health of the banking sector. These concerns will be exacerbated if the economic recovery is patchy. Some in the markets are saying a too hasty withdrawal of liquidity might even pitch the world back into recession. If recovery gathers pace, central banks will be wary of fuelling fears of inflation. A key event will be the ECB's final six-month tender in March, when it may become clear how much of the 442 billion euros of one-year funds, due to be repaid in June, will go into the six-month tender. If banks fill up on funds it will show they still feel dependent on central bank aid. A low-take-up may be a sign banks are ready to stand on their own two feet. The path to the exit is becoming clearer but timing will be key in 2010.

2/ DOLLAR MAY BE FUNDAMENTALLY STRONGER IN 2010

U.S. interest rates pinned near zero have kept the dollar weak for most of this year but stronger-than-expected U.S. jobs and retail sales data has put a spring into the step of the groggy greenback. Is it going to come out fighting in 2010? The dollar index, which measures the dollar's performance against a basket of currencies, was down 7 percent year-to-date earlier this month before the recent rally. The simple trade this year was to sell the dollar whenever investor appetite for risk picked up and invest in higher-yielding assets. The Australian dollar, a popular buy in carry trades, is up 25 percent against the U.S. currency this year. But this may be changing. The U.S. dollar rallied on the retail sales data as U.S. Treasury yields rose. This week's leg-up in the dollar has been accompanied by low volatility in stock markets, as measured by the VIX fear index. In 2010 we may see the dollar rise or fall on economic fundamentals and signals from the bond market, particularly as the Fed gradually exits from its ultra-loose monetary policy.

3/ DISCRIMINATE TO ACCUMULATE

The risk on/risk off trade, which saw investors sell dollars for pretty much any higher-yielding asset when appetite for risk-taking was up and do the reverse when risk appetite waned, is likely to be less pronounced next year as central banks enact their exit policies and withdraw liquidity. Correlations between asset classes have broken down. Investors are going to have to be nimble and quick to make a buck in 2010. Market volatility is expected to increase. This has been illustrated since October in FX options, for example, where vols have continued to fall but with more volatility. In equities, most analysts see European stocks rallying next year but picking winners will be tougher. Defensive stocks, such as telecoms and utilities, are doing well and are likely to do so again in 2010.

4/ SOVEREIGN RISK TO THE FORE

Smaller euro zone economies such as Portugal and Spain have so far escaped relatively unscathed from the sell-off in Greek assets as the Hellenic Republic struggles to restore its fiscal health but this looks set to change after the latest blow to Greece's credit rating. Market scrutiny of these countries' deteriorating public finances is intensifying going into 2010, driving up premiums investors demand to hold their sovereign debt and spurring more discerning investors to cherry pick assets from emerging European countries with relatively lower debt piles and already lower ratings.

5/ CHINA'S YUAN - CAREFUL WHAT YOU WISH FOR

The pressure on China to loosen controls on the yuan will build in 2010. U.S., European (and increasingly Asian) policymakers will continue to argue that de-pegging the yuan from the dollar is a critical step in fixing global imbalances - a key G20 goal. But this may be difficult. China's economy is booming, with annual growth nudging 10 percent. The pressure is on the PBOC to tighten policy to cool the fervor, which in turn makes the yuan more attractive. Whichever way you look at it, the pressure on the yuan appears to be to the upside. And it must be remembered that around two-thirds of China's $2.27 trillion foreign exchange reserves are thought to be denominated in dollars. A yuan revaluation could wipe tens of billions of dollars of value from these holdings. The United States might want to be careful what it wishes for too. An appreciating yuan would cut China's trade surplus and therefore its purchases of U.S. Treasuries, which could send long-term U.S. interest rates up and threaten to derail the economic recovery.

(Compiled by Nigel Stephenson; editing by Stephen Nisbet)

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