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MORNING BID EUROPE-ECB's Draghi: Whatever it takes, Part 2?

* A look at the day ahead from European Economics and Politics Editor Mark John and EMEA markets editor Sujata Rao. The views expressed are their own.

LONDON, July 26 (Reuters) - The ECB's increasingly suggestive language on imminent rate cuts, further stimulus and even the assertion yesterday that it would let inflation breach the bank's official two percent target were initially not enough to satisfy those in the markets seeking cheaper money right now. ECB President Mario Draghi did his best at the news conference to drop even heavier hints of easing to come, and sources close to the bank weighed in later with promises that a September rate cut was now almost a dead cert. Finally, the barrage of messages managed to get through, with many now pricing in a 10-basis-point cut in September. Yet whether the limited tools at the disposal of the ECB can kickstart the ailing eurozone economy is another matter altogether: with rates already so low, the law of diminishing returns applies to further cuts, while the ECB is simply running out of things to buy in its QE programme as currently designed. With a strong majority of economists polled by Reuters now saying a deeper global slowdown is on the cards, the challenge facing Draghi in his final weeks before handing over to Christine Lagarde is considerable.

Socialist Pedro Sanchez' election victory in April looked to be a significant turning point for Spain a decade after the financial crisis, and moreover ushered onto the European stage a new rallying figure for the continent's beleaguered Left. Yet he is now battling to avoid fresh elections after his attempts to form a coalition with far-left Podemos failed again yesterday. Apart from differences on what posts Podemos should occupy in his cabinet and on Catalonia, the other problem is personal: it turns out that he and Podemos leader Pablo Iglesias just can't stand each other. Late last night Sanchez insisted he had not given up on forming an alliance just yet, but the odds look stacked against him.

Britain, France, Germany, Russia and China will meet Iran in Vienna on Sunday to discuss how to save the 2015 nuclear deal. The notable absentee, of course, is the United States following Donald Trump's rejection of the pact.

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MARKETS AT 0655 GMT Yesterday turned out to be a bit disappointing for markets, with the ECB failing to raise interest rates and Wall Street knocked off record highs by some lacklustre company earnings. Some of the impact carried through to Asia this morning and MSCI's world stocks index is down 0.15%, just off 18-month highs.

It might brighten up however – first, several companies that announced results after the U.S. market close beat expectations, and in after-hours trade Google parent Alphabet jumped 7.9%, Intel 1% and Starbucks 6.6%. Amazon, however, dipped 1.6% on its first profit miss in two years. Anyway. US share futures are trading some 0.2% higher and European markets are also opening up after a weak close yesterday on ECB disappointment.

Across Asia, Japanese tech firms slid, tracking the Nasdaq and knocking the Nikkei off 2-1/2 month highs. On the currency and bond markets, the euro was trading indecisively, after Thursday's volatility – after hitting two-year lows to the dollar, it then recouped some of those gains to close higher against the dollar, while it jumped 0.7% versus the Swiss franc and half a percent to the yen as ECB President Mario Draghi spoke to reporters. Draghi all but pledged to loosen monetary settings further but disappointed those who had sought a cut this month as well as those who had expected a more dovish statement.

A comment implying discord within the council on policy as well as hints that the economy was not as weak as it seemed, pushed currency, bond and stock markets to reverse initial knee jerk moves. Nor has the euro been lifted by a Reuters source-based story that says a September cut is a done deal.

Euro zone bond yields are slipping again today but off the lows of yesterday -- German yields, for instance, are down 1.5 basis points at minus 0.38% after falling a minus 0.422% record on Thursday.

Europe's data calendar is thin today with just consumer confidence numbers due from France and Germany, but in the United States we get flash GDP figures that are expected to show growth at 1.8% in April-June quarter — the slowest in more than two years. People will be watching the numbers anxiously given the Fed meets next week and easing expectations have already been tempered from 50 bps to 25 bps.

A strong figure today coming after yesterday's robust new capital goods orders could paint a picture of an economy chugging along nicely - and force markets to reassess their current expectation for 3 Fed cuts in 2019. Currently markets reckon on a 80% chance of a 25 bps cut next week.

The rate cutting cycle is extending far and wide though – Turkey slashed rates by 425 bps yesterday and surprisingly prompted a lira rally. Today Russia is expected to cut by 25 bps to 7.25% and Indonesian authorities are on the wires this morning saying they see “room for more monetary accommodation”.

European stocks are slightly higher this morning, a tentative recovery from yesterday's heavy losses following the ECB's policy statement, although Frankfurt and London are showing some weakness. Solid U.S. numbers overnight from Google-owner Alphabet, Intel and Starbucks are offsetting weaker Amazon numbers for now, although STMicro and Infineon may come under pressure after Apple took a major step toward supplying its own smartphone chips by buying the majority of Intel's modem business in a deal valued at $1 billion.

FTSE is slightly lower amid renewed hard-Brexit worries. Investors are digesting news that Britain will hold an emergency budget in the autumn aimed at shoring up the economy and real estate agent Foxtons Group blamed a drop in H1 revenue on falling London house prices, underscoring Brexit uncertainties.

Otherwise luxury goods and the auto sector continue to take the spotlight in earnings. Gucci-owner Kering are down as much as 8% after reporting a slower-than-expected rise in Q2 sales, hit by a blip in the United States. That could take some of the shine off the luxury goods sector rally this week. Shares in French carmaker Renault and tyre maker Michelin are down 1-2%, the latest to knock confidence in the struggling car and auto parts suppliers sector amid falling demand and tough regulatory conditions. Renault's 2019 revenue cut and Michelin's weaker profits may well be priced in after a punishing week for the industry with warnings piling up (Nissan, Continental, Daimler to name a few).

Shares in UK telecom company Vodafone are expected to get a much needed boost as investors welcome news it will spin off mobile mast infrastructure business for a potential listing. After the company slashed its dividend, the news is likely to revive shareholder spirits somewhat. For Bayer, some much-needed good news in its prolonged Roundup trials which is sending shares up nearly 2% in premarket trading - a California judge has slashed a $2 billion award for a couple who blamed the German company's glyphosate-based weed killer for their cancer to just $86.7 million.

In emerging markets Russia's central bank will become the latest to cut interest rates. The Turkish lira is a touch positive, continuing the rally after the deeper than anticipated rate cut by its central bank on Thursday. Most Asian currencies eased against a strong dollar, with the Thai baht and the South Korean won both down 0.7% for the week, with the latter hit by North Korea's latest missile launch. Chinese shares edged higher, brushing off uncertainties over whether negotiations between Washington and Beijing will be able to settle differences over trade, technology and geopolitics. Argentina's economic activity rose for the first time in over a year in May.

Upcoming events/data/themes for market reports Japan July Tokyo CPI inflation Europe corp events: Nestle, Suez, Renault, EdF, Eni, Sabadell, Caixabank, IMI, Vodafone trading, Pearson, Hexagon, Rightmove, Italy July consumer, business confidence France July consumer confidence, June producer prices Sweden June retail sales, trade balance Russia central bank policy decision US earnings: Twitter, Aon, Cabot Oil, MacDonald’s, Colgate Palmolive, AbbVie, Weyerhauser, Universal Health, Mohawk. US Q2 GDP Mexico June trade balance APEC finance ministers meeting continues in Santiago BRICS foreign ministers meet in Rio to prepare for Brasilia summit in November Sovereign credit rating reviews – S&PGlobal reviews Slovakia, Azerbaijan, Guernsey, Jersey. Moody’s reviews Finland, Moldova; Fitch reviews Czech Rep, Finland. DBRS reviews The Netherlands, ESM, EFSF (Editing by x x)