MORNING BID EUROPE-Hard Brexiteers issue "ransom note"

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

LONDON, Feb 21 (Reuters) - Just as Brexit Minister David Davis was in Vienna yesterday stressing the "mutual recognition" he expected Britain and EU regulatory systems to enjoy after Brexit, so a group of 62 hard Brexiteers in his party were penning a letter with their own quite different set of demands. That missive to PM Theresa May insists on "full regulatory autonomy" outside the EU and a green light for Britain to start negotiating its own separate trade deals with other countries even during the two-year transition period following March 2019. The letter - described as a "ransom note" by the Conservative head of parliament's Treasury select committee - was signed by members of the so-called European Research Group which also published its membership for the first time: no surprises but that includes backbencher Jacob Rees-Mogg and former ministers Ian Duncan Smith and Priti Patel. The timing is of course no accident - it comes as May battles to reconcile the open differences within her government on what its future relationship with the EU should be.

Emmanuel Macron's government will today propose toughening France's immigration and asylum laws, overriding loud criticism from human rights groups. The bill will double to 90 days the time in which illegal migrants can be detained and shorten deadlines to apply for asylum, and it will make the illegal crossing of borders an offence punishable by one year in jail and fines. The move is a big test of discipline within his ruling Republic On The Move party, with at least one parliamentarian already calling for changes and another saying the bill was cynically "playing on people's fears". It is likely, however, to go down well voters. A BVA opinion poll earlier this month showed that 63 percent of French voters consider there are too many immigrants in France.

Two important reports out today: Amnesty International launches its 2017 overview, contending that last year was one of the worst for human rights, with political leaders engaging in hate speech and ignoring crimes against humanity. And Transparency International's closely watched Corruption Perceptions Index gets released later in the day. Its rankings are based on assessments by businesspeople and experts about how graft-ridden a country is on the ground, taking in a broad range of criteria. In Europe, expect the Nordics to be given once again a shiny bill of health, with more problematic ratings for countries in the east and the south.

MARKETS AT 0755 GMT A number of events in the past 24 hours have contributed to market nerves, with record-high amounts of Treasuries on auction this week, 3- and 6-month maturities sold yesterday at the highest yields since September 2008, and 10-year Treasury yields hovering near recent four- year peaks. The dollar seems to be finally catching up with the yield bounce, having risen almost 2 percent in three days; the appointment of Spain’s de Guindos to the ECB may have tipped the balance in favour of a northern hawk – possibly Germany’s Weidman – to the top job. And in the background, the economic news drumbeat remains the same. Growth is marching along nicely and yesterday's German Zew survey was reasonable. It’s been clear that yields have nowhere to go but up. The speed of the rise is what is going to be crucial. World stocks are flat and Europe is set to open lower though Asia ex-Japan rose and Japanese shares ended up 0.2 percent. U.S. equity futures so far point to a slightly firmer Wall Street. On currency markets, the dollar is up again against the FX basket and the yen is at a one-week low. Sterling has pulled back a touch after a small bounce on Tuesday, fuelled by hopes of a transition deal on Brexit. Wage data today will be key. In terms of what lies ahead, we have the Fed meeting minutes due which could show the way for the greenback and yields. UK wage data will show if sterling maintains its momentum while the South African budget will be key for the rand’s fate. Flash PMIs too lie ahead for the euro zone and United States - Japan’s has already disappointed, showing what a strong yen can do. Finally there are more Treasury auctions. Other issues include the suspension of an ECB governing council member after bribery allegations, an escalation of tensions between Syria and Turkey which is causing a sharp selloff in the lira, and U.S. shares snapping a six-day winning streak, led down by Walmart’s 9 percent plunge as results disappointed. European shares are set for a pullback, though judging by this week’s trading so far, we could well see a push higher later in the session. The action today will, once again, be dominated by earnings as several big UK firms report earnings. While full year figures from bank Lloyds missed estimates (despite hitting records), investors could cheer the 1 billion-pound share buyback – shares have opened 2 percent higher. AA’s shares are on the other hand down an astonishing 23 percent after the roadside recovery firm said that it planned to pay lower dividends and sees lower 2019 core profits. Other risers include Glencore (Frankfurt: 8GC.F - news) and telco Orange (LSE: 0OQV.L - news) . Overall European fourth quarter earnings are expected to increase 14.6 percent from the same period in 2016, which would be an increase of 11.6 percent excluding the energy sector, according to data from Thomson Reuters I/B/E/S. European stocks movers/company news: Lloyds bank profit rises to record $7.4 billion, but misses estimates; Glencore says full-year results 'best ever'; Telefonica Deutschland sees steady 2018, plans dividend increase; Maersk Energy sees uptick in offshore oil drilling, profit still squeezed; MTU Aero eyes further profit rise in 2018, subject to A320neo; Deutsche Boerse posts rise in net profit despite weak markets; AccorHotels' increase in 2017 profits beats expectations; Orange's annual sales in France grow for first time since 2009; OMV (IOB: 0MKH.IL - news) 's operating profit benefits from higher crude prices; UK's Metro Bank (Frankfurt: 6MB.F - news) reports first annual profit; Channel tunnel group Getlink's profits rise, considers governance changes; France's Atos (Paris: FR0000051732 - news) reports organic growth in-line with expectations; Miner Hochschild expects production to double this year; FirstGroup (Amsterdam: FI6.AS - news) sees earnings "slightly" lower hit by weather, competition; Temenos agrees 1.4 bln pounds deal to buy British software house Fidessa; AA to pay lower dividends; Volkswagen (IOB: 0P6N.IL - news) , German union IG Metall reach wage agreement. In emerging markets, rand weakened 0.2 percent with Finance Minister Malusi Gigaba due to deliver the country’s first budget under new President Cyril Ramaphosa. Analysts expect tax hikes to help plug a revenue gap and narrow the deficit. Investors are also awaiting details of Ramaphosa’s new cabinet, with the president saying he would screen the lifestyles of future government officials. It is not yet clear if Gigaba will keep his job.

Emerging stocks rose 0.9 percent, led by Hong Kong up 1.7 percent and Taiwan (Taiwan OTC: 6549.TWO - news) stocks surging 2.8 percent in their biggest one day gain since September 2016. The Turkish lira firmed 0.1 percent after a heavy selloff on Tuesday when pro-Syrian government forces entered Syria’s northwestern Afrin region. Upcoming events/data/ themes for market reports: WEDNESDAY Feb flash PMIs from around the world Europe corp events: Iberdrola (Amsterdam: ID6.AS - news) , Orange, Hochtief (IOB: 0EPW.IL - news) , Barratt Developments, Capital & Counties, Accor (EUREX: 485822.EX - news) , Sartorius (IOB: 0NIQ.IL - news) , Lloyds, Glanbia Hochschild Mining, Glencore (Amsterdam: GX8.AS - news) UK Jan jobless, Dec (Shanghai: 600875.SS - news) earnings South Africa budget, Jan inflation report Sweden auctions government bonds US Q4 earnings: TechnipFMC, Synopsys (NasdaqGS: SNPS - news) , Garmin (Frankfurt: GEY.F - news) , Southern, etc US Jan existing home sales FOMC policy meeting minutes Minneapolis Fed chief Kashkari speaks in Minneapolis US Treasury auctions 5-year notes and 2-year FRNs (Editing by Raissa Kasolowsky)