MORNING BID EUROPE-Brexit vote: May braced for worst

* A look at the day ahead from European Economics and

Politics

Editor Mark John and EMEA markets editor Mike Dolan. The views

expressed are their own.

LONDON, Jan 15 (Reuters) - No sign has yet to emerge of the

sea change in parliament that PM Theresa May would need to

secure victory for her Brexit plan sometime after 7.00 pm (1900

GMT) tonight. That suggests that most of the suspense will be

around the scale of the defeat and what that implies for her

next steps: expectations are so low that a loss by a margin of

less than 100 seats would be considered a respectable outcome

for May. That would allow her to signal, as early as tonight, a

plan to go back to Brussels and seek more explicit assurances

that the Irish backstop can only ever be a temporary one.

A more comprehensive defeat and the terrain becomes even

murkier. May could come under pressure from business and others

to state categorically that a no-deal Brexit is not an option;

or indeed to raise the prospect of an extension of the Article

50 process. If it is really bad, her future and that of the

government becomes an issue. Labour are now expected in the

event of a defeat in any case to call a vote of confidence which

they will lose as long as the Northern Irish DUP stays on May's

side. Yet whatever happens, there will be a push by lawmakers to

take the process out of her hands and put it in the control of

parliament - for example by establishing a cross-party committee

to agree on a way forward. We are about to go deeper into

uncharted territory.

"Turning anger into solutions" is how Emmanuel Macron bills

the three-month national policy debate he launches in a small

town in Normandy today. The initiative comes after nine weeks of

protests by the "yellow vests", a disparate anti-government

uprising that has wreaked havoc in Paris and other French

cities, shaken the economy and challenged his authority.

Scepticism about Macron's motives remains high: he has promised

to listen to new ideas but insists he will stick to his core

economic reform agenda.

Germany releases the first estimate of its GDP growth rate

for last year this morning with many fearing bad news: analysts

polled by Reuters have a median forecast of 1.5 percent compared

to the 2.2 percent registered in 2017. Yesterday's euro zone

industrial output data for November - which saw its biggest fall

in nearly three years - will add to the pessimism.

MARKETS AT 0755 GMT

World markets started Tuesday in more buoyant form – riffing

off attempts by both Washington and Beijing to downplay the

risks associated with their damaging trade war and taking a cue

from sterling’s bizarrely positive twist on today’s long-awaited

UK parliamentary vote on Brexit. Despite Wall St ending in the

red overnight, Shanghai and HK stocks recouped Monday’s losses

to gain almost 2 percent – with Tokyo rising 1 percent on return

from holiday and Seoul up smartly too. Although still painfully

short on detail, the mood was improved after U.S. President

Trump said on Monday he thinks a trade deal with China was

possible and Beijing wanted to negotiate, and after a series of

nods and winks from Chinese officials on Tuesday that more

stimulus for its slowing economy was in the pipeline. China’s

offshore yuan was steady, but Australia’s dollar was higher and

Japan’s safe-haven yen slipped back.

Sterling continued to push higher toward its best levels of

the year so far even though UK PM May is widely expected to lose

today’s vote in parliament on her Brexit compromise with the

European Union by more than 100 votes. While next steps are

unclear, the new-found bullishness toward sterling is rooted in

the idea that a no-deal Brexit will likely be averted due to

greater involvement of parliament in the process and some of the

parliamentary amendments being voted on tonight in that regard

may be as important as the main vote. With (Other OTC: WWTH - news) many traders now

taking the view that sterling’s medium-term valuations are cheap

enough to account for all that, positioning is overly short and

an easier dollar accommodative, pressure has eased on the pound

both in the spot and options markets.

Elsewhere, traders will be eyeing the release of German 2018

GDP data amid growing fears of a recession in the euro zone’s

biggest economy. ECB chief Draghi speaks in the European

Parliament later in the day.

U.S. fourth-quarter earnings kick into gear with updates

from JPMorgan (LSE: JPIU.L - news) and Wells Fargo (Swiss: WFC-USD.SW - news) . Citi’s stock rose 4 percent on

Monday after it beat profit forecasts for the quarter, even

though it disappointed on revenue. U.S. stock futures are up

about 0.4 percent first thing, with European stocks opening up

almost 1 percent. Political tensions in Greece appeared to ease,

meantime, with Prime Minister Tsipras set to win a confidence

vote on Wednesday after winning the support of an opposition

centrist lawmaker who broke ranks with his party.

* Europe corp events: Aeroports de Paris traffic. Boohoo

trading, Provident Financial (Other OTC: FPLPF - news) trading, Hays (LSE: HAS.L - news) trading, Persimmon

trading, Genel trading

* France, Spain Dec inflation

* Germany 2018 GDP

* Netherlands Nov trade balance, retail sales

* Bank of Brazil chief Goldfajn speaks in Geneva

* EZ Nov trade balance

* European Central Bank chief Draghi addresses European

Parliament

in Strasbourg about ECB’s annual report; Bank of Spain chief

Hernández de Cos speaks at Madrid stock exchange

* Turkey Dec budget balance

* Greek parliament starts debate on confidence motion in

government, vote expected late Wednesday

* US Q4 earnings: JPMorgan, Wells Fargo, Delta AirLines,

Kinder

Morgan (Other OTC: MGHL - news) , UnitedHealth, IHS Markit (Stuttgart: A1139A - news) , Charles Schwab

* US Dec PPI inflation

* Minneapolis Fed chief Kashkari speaks in Rochester; Dallas

Fed

chief Kaplan speaks in Plano; Kansas fed chief George speaks in

Kansas City

* UK parliament votes on PM May’s negotiated Brexit deal

with the

European Union

(editing by John Stonestreet)