MORNING BID EUROPE-A clue on Brexit from May; pressure on Merkel

* 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, Sept 5 (Reuters) - At this weekend's G20 meeting in China, Britain's Theresa May has finally given some clues as to what Brexit will mean -- or, more accurately, what it won't mean. She (Munich: SOQ.MU - news) has come out squarely against the Australian-style "points system" for choosing economic immigrants that is backed by several of her pro-Brexit colleagues now in cabinet. She did not spell out what her preference was an alternative to the current freedom of movement arrangement with the EU, but her comments will get many in the Brexit camp worrying that she is looking for a soft compromise with Brussels on this. In that context, David Davies, the minister in charge of delivering Brexit, is due up in parliament later today to make a statement on work so far, while the latest PMI reading for Britain's giant services sector will shed light on how the economy is going two months after the shock vote.

Questions will inevitably grow over whether Angela Merkel can run for a fourth term after this weekend's defeat in a state election IN her home region of Mecklenburg-Vorpommern. It looks pretty clear that her "open doors" migrants policy was a major factor in her CDU party coming a poor third in the state after the incumbent SPD and the anti-migrant AfD. Some analysts are already talking about "Kanzlerdaemmerung" - "Twilight of the Chancellor". All eyes will be on the mood within the Bavarian CSU party today, and particularly on its leader Horst Seehofer who has heavily criticised her on the subject -- and is seen by some considering his own run at the chancellorship.

MARKETS AT 0700 GMT

Markets have slipped back into reading every Fed input as a "lights on/lights off" event and slightly disappointing economic news as a positive given that it staves off another rate hike for now. The underwhelming August payrolls from Friday was read as such and has lifted stocks and bonds across the world. Read on its own, the employment report would be unlikely to shift any existing Fed course. But taken with a surprise contraction in the August manufacturing ISM, it's likely to have taken any move this month off the table and, by extension, pushed the whole timeline beyond the November election. With Wall St closed today for the Labor Day holiday, the S&P 500 closed almost half a percent higher on Friday and the dollar index slipped back. Asia bourses have followed suit today, with Hong Kong and Seoul leading the way with gains of more than 1 percent. Eurostocks are seen extending strong rallies seen on Friday. Euro/dollar is a touch higher but remains below $1.12. Brent crude is firmer too but stays below $47pb.

There was little for markets to chew on so far from the G20 beyond handwringing over serial threats to globalization at large. UK PM May's first summit came as she threw cold water on thoughts of a post-Brexit points-based immigration system promised extensively by the 'Leave' campaign before the referendum. The big data point today will be the release of August services PMI data across the world, with UK services watched particularly closely after surveys showed a big manufacturing rebound last month. Spanish bonds will also be watched as Spain looks headed for the third election this year after acting PM Rajoy lost another confidence vote.

Upcoming events/data/themes for market reports on Monday:

- G20 summit in Hangzhou, China (through Tues)

- Asia, including China, Europe and Latin America release Aug service sector PMIs

- Europe corp events: Topps Tiles (LSE: TPT.L - news) , Helvetia

- Sweden July new orders

- EZ July retail sales

- Russia August inflation

- Ireland (Other OTC: IRLD - news) /Norway July and Aug house prices

- Turkey August inflation

- U.S (Other OTC: UBGXF - news) . markets closed for Labor Day holiday (Editing by Sonya Hepinstall)