MORNING BID EUROPE-ECB to highlight inflation downside

* 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 21 (Reuters) - The European Central Bank is expected to keep all interest rates on hold at 1245 GMT but highlight increasing growth and inflation risks, raising the prospect of further policy easing later this year, possibly at its June meeting.

Meeting for the first time since it cut rates and expanded its asset purchase programme in December, the ECB is expected to warn that inflation could stay ultra-low longer than an already downbeat forecast pegged on plunging oil prices, weak Chinese growth and the lack of decisive fiscal policy action at home.

It (Other OTC: ITGL - news) will also be interesting what Mario Draghi has to say about turmoil in the bank sector with shares in Italian, Portuguese and Greek lenders plunging on concerns the ECB may eventually force them to take a loss on some of their bad loans, reducing their ability to pay dividends. The news conference is at 1330 GMT.

Nearly a decade after the murder of Kremlin (LSE: 0Q8D.L - news) foe Alexander Litvinenko with a cup of green tea laced with Polonium-210, an rare isotope mainly produced in Russia, the British inquiry into his death is due to give some answers at around 0930 GMT.

To what extend was the Russian state involved? And if so, did the order come from the Kremlin's own former KGB agent in chief Vladimir Putin? Any finger-pointing in the direction of the Kremlin will increase diplomatic pressure on the British government to confront Moscow on the affair; however wider geopolitical prerogatives, among them the need to keep Russia on board in the international push for an end to the conflict in Syria, may tone down any reaction.

Meanwhile his 1300 GMT speech at Davos is the perfect forum for David Cameron to urge business to get behind his push for Britain to remain in a "reformed" EU. So far, some companies have been reluctant to stick their neck on the line either way for fear of annoying clients or staff, but there will be greater readiness to do so once reform negotiations have been concluded, possibly as early as next month. Goldman Sachs (NYSE: GS-PB - news) has put its money where its mouth is and given a six figure sum to the campaign for Britain to stay in the European Union.

Italy's government is following with concern a rout in domestic banking shares but insists the system is solid. In an interview with financial daily Il Sole-24 Ore, Prime Minister Matteo Renzi rejects the idea that Italy is facing another 2011 style crisis and insists that current events will ease mergers, tie-ups, purchases. Expect more in the same vein from his news conference at 0900 GMT

MARKETS AT 0745 GMT

When a 1 pct drop in the S&P500 is considered something of a relief - you know there's trouble. Although the off the worst moments of Wednesday, there are still few signs of an end to this month's dramatic market turbulence.

Shanghai is down more than 3 percent, Tokyo down more than 2 percent, HK down 1.7 percent and both Eurostocks and Wall St futures remains negative and show now sign of a bounce. Oil prices at the epicentre of the fears hover precariously above new lows set yesterday and Brent is just above $27pb.

The big emerging markets pressure points are alarming, with the IIF forecasting another year of capital flight from emerging economies this year to the tune of almost half a trillion dollars. Russia's rouble is now effectively in freefall at record lows again and there's intense speculation on pegs from the Saudi riyal to the Hong Kong dollar.

With the global shakeout now the fourth worst month in the 28 year history of the MSCI (NYSE: MSCI - news) world stock market index, the spotlight shifts squarely to a monetary response. With Fed officials in purdah ahead of next week's FOMC meeting, it is up to Mario Draghi and the ECB to speak at Thursday's meeting.

Given that the global stress, along with Italian banking concerns, have now infected euro sovereign debt spreads again, Draghi has good reason to address it. But the soundings so far from Frankfurt do not sound like the bugles of a rescuing cavalry.

In fact the worldwide monetary response so far has been mixed and the reaction of many policymakers and investors alike appears to be one of wishing it all away. Mark Carney and the Bank of England did tilt away from a 2016 rate hike but the Bank of Canada disappointed many expectations for an ease on Wednesday. Brazil, on the other hand, did refrain from an expected hike. But if a mass policy response is what the doctor ordered, then markets could well be disappointed on that score.

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

* Malaysia rate decision

* European corp events: SAB Miller, Pearson (Xetra: 858266 - news) , Land Securities, Bankinter (Amsterdam: BI6.AS - news) , Eurotunnel (Paris: FR0010533075 - news) , Ahold, Logitech

* France Jan business climate

* Spain govt bond auction

* EZ Jan consumer confidence

* Turkey Jan consumer confidence

* Poland Dec Industry, PPI, retail sales

* ECB policy decision, press conference

* US Q4 earnings: BoNY Mellon, Amex, Verizon (NYSE: VZ - news) , Union Pacific (Swiss: UNP.SW - news) , Starbucks (Swiss: SBUX.SW - news)

* US Jan Philly Fed index

(Editing by x x)