MORNING BID EUROPE-Crunch time for Cyprus; May's "shared society"

* 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 9 (Reuters) - Leaders of ethnically split Cyprus start a week of talks from Monday in an attempt to reach an historic peace deal to end decades of division on the island. Past sticking points have ranged from power-sharing arrangements to redrawing property boundaries; this time, mediators want to capitalise on the fact that in Turkish Cypriot leader Mustafa Akinci and Greek Cypriot leader Nicos Anastasiades they have two relative moderates, raising chances of a deal. That said, Akinci offered a big dose of caution on Sunday, warning against "exaggerated expectations".

British PM Theresa May sets out in a speech today what she hopes will offer some respite from Brexit-dominated headlines with proposals on social reform, part of what she has termed her "shared society" agenda. Sceptics will scrutinise the plan for concrete details behind the slogan, a twist on her predecessor David Cameron's "big society" pitch that tanked. Meanwhile, financial markets are picking over her comments on Brexit yesterday, with sterling down around a cent on the dollar thus far. Some local media see her suggestion on Sky News that Britain cannot retain "bits" of EU membership as a signal that Britain will "leave" the EU single market. But hang on a minute: The UK will by definition "leave" the EU single market once it leaves the EU. The real question is the level of access it gets to it afterwards, ranging from tariff-free access (Norway, Switzerland) to the access you have to pay for (as U.S. exporters do, for example). On that issue, May continues to argue simply that she will get the "best deal" for Britain. Notwithstanding, some in the market think they have spotted a harder tone in her comments. But has she really revealed her hand at last? It doesn't look like it.

Beppe Grillo, leader of Italy's maverick 5-Star Movement, has called on it to cut ties with the anti-European Union UK Independence Party (UKIP) and consider hooking up with the Liberals group ALDE in the European Parliament. If it happens, that would be a turn-up for the books that would see 5-Star ally (Other OTC: SALY - news) itself with mainstream European politics and move away from the anti-system fringes. The move would appear to have the backing of ALDE head Guy Verhofstadt but some in the liberal grouping will be nervous of hooking up with the unpredictable 5-Star, whose members will now be balloted on the proposal.

MARKETS AT 0755 GMT

Transport strikes may make for a stuttering start to the first full trading week of the year for London markets, but equity bulls would appear to have the upper hand still. Wall St stocks set another record on Friday. Even (Taiwan OTC: 6436.TWO - news) though the Dow Jones stopped short of the 20,000 milestone again, the ViX 'fear index' slipped back down to the lows of 2016 below 11 pct - remarkable given some of the uncertainties ahead. The biggest of those is just how President-elect Trump's actual policies match up to his campaign rhetoric - where his economic pledges on tax cuts and spending at least have provided an overwhelming stimulus to western stock markets and lifted the dollar and global bond yields too. Trump plans a keynote press conference on Wednesday that may set out his stall in more detail before Jan 20's inauguration. Given just how much markets appear to have bought into the idea of 'Donaldomics', the balance of risks may be for some disappointment in their actual delivery. The other backdrop to start the week was Friday's US payrolls report, which underwhelmed on new job numbers but beat forecasts on earnings growth - critical now for inflation watchers going forward. Economic data out earlier for Germany showed strong monthly gains in exports of almost 4 pct even though below forecast industrial output during the month. That said, German bond yields rose to a three-week high in early trade as traders eyed a week of heavy new debt supply and against the still resonating jump in German December inflation report last week. On that score, Brent crude prices remain firm just below $57pb. Asia bourses were mixed, with Shanghai stocks stabilizing on a steadier yuan after last week's wild swings. Tokyo was closed but other regional bourses were down largely on a renewed pick up in the dollar and Treasury yields. Emerging market currencies at large were lower as a result, with Turkey's lira at a new low. Euro/dollar was subdued just above $1.05.

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

* European corp events: William Hill (Frankfurt: 633847 - news) trading statement; Air France-KLM Dec traffic; JD Sports update, ICAG (British Airways) traffic figures, Continental (IOB: 0LQ1.IL - news) results

* Swiss Nov retail sales

* German Nov industrial output, Dutch Nov manufacturing output

* German Nov trade

* UK Dec Halifax house prices

* BoE (Shenzhen: 000725.SZ - news) deputy gov Shafik speaks on future of central banking

* EZ Jan sentix indicator, Nov jobless

* EU Parliament's Brexit negotiator Verhofstadt press conference

* Turkey Nov industrial production

* Greece Nov industrial output

* Russia budget

* SNB 2016 results

* Mexico Dec inflation

* US Nov consumer credit

* Chicago Fed chief Evans speaks in Chicago, Boston Fed chief Rosengren speaks in Hartford, Atlanta Fed chief Lockhart speaks in Atlanta (Editing by Dominic Evans)