MORNING BID EUROPE-"Last gasp?" Knives out for PM May

(Corrects from Spanish ratings to Catalonian in 2nd para)

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

LONDON, Oct (Shenzhen: 000069.SZ - news) 5 (Reuters) - After one of the worst conference speeches in a generation, the knives - editorial and political - are out for Prime Minister Theresa May this morning. UK headlines riff mercilessly on her coughing fit and dysfunctional stage set: "May’s British dream turns into a nightmare", "Luckless May centre stage in tragic farce", "May on final warning after speech shambles," "Last gasp", "What the F?" If The Times is to be believed, her performance has triggered renewed chatter about her future as party leader and PM. That may be true - but the existing logic still holds: if not her, who else?

Standard & Poor’s has now put Catalonia's B+/B credit ratings on "creditwatch negative" as the political stand-off over Catalonia escalates. PM Mariano Rajoy's office last night maintained its hard stance, telling the region's leader Carles Puigdemont that no dialogue was possible while it maintains the threat of a unilateral declaration of independence. Underlining how this is testing Spain's core bodies of state, Puigdemont has sharply attacked King Felipe VI for following the government line on the crisis and "deliberately ignoring millions of Catalans". The focus remains on whether there is still any way to avoid "UDI" - the independence declaration - by Monday.

The Netherlands, with one of the strongest economies in Europe, is not known for industrial action so it is noteworthy that thousands of elementary schools will stay closed today in a rare strike by school teachers. The reason, reflecting a theme that pervades much of European politics right now, is stagnant wages - fuelling the wider frustration of many workers who feel the region's economic recovery is largely passing them by. MARKETS AT 0655 GMT

A sale of Spanish government debt on Thursday will be a test of how far the crisis over Catalonia is affecting investor confidence in Spain. Spanish stocks have underperformed the broader European market, with some banks taking a hit, while sovereign bond yields hit their highest since March on Wednesday.

Spain will offer three bonds for a combine total of up to 5.25 billion euros and some analysts see a subdues take-up.

Otherwise, the big event is probably the release of the minutes of the most recent European Central Bank meeting, at which policymakers expressed concern that euro strength was weighing on inflation. Any details of how the ECB plans to proceed with unwinding its stimulus scheme could also move bond markets.

The euro was flat at $1.1756 as the dollar edged up less than 0.1 percent against a basket of currencies, still buoyed by Wednesday’s stronger-than-expected U.S. services sector data. Friday sees the release of the monthly U.S. jobs report and that may limit market activity. They yen and sterling were also down slightly against the greenback.

European shares are expected to open broadly unchanged with the DAX consolidating near the fresh record highs hit in the previous session and Spanish blue chips set for a marginally higher start after escalating Catalan tensions caused their biggest loss since last year's Brexit vote. Futures were last down 0.1 percent.

Among stocks to watch is Osram Licht (IOB: 0QFR.IL - news) , which could be hit after German engineering firm Siemens (BSE: SIEMENS.BO - news) sold its remaining 17 percent stake in the lighting group for 1.2 billion euros to institutional investors, severing links with its former unit.

Banks could be also be in focus for a second day after troubled Italian lender Banca Carige (Dusseldorf: -BJ51.DU - news) warned it could be wound down by European supervisors if its capital strengthening plan fails. The euro zone banking index suffered a 2 percent drop on Wednesday, weighed down by political worries in Spain and following news that the ECB will ask them to set aside more cash to cover newly classified bad loans. Analysts at KBW say this may particularly impact Italian and Greek banks.

Eyes also on Bayer (IOB: 0P6S.IL - news) after Brazil's competition regulator said its proposed takeover of Monsanto (Hamburg: 1132157.HM - news) could be detrimental to competition and urged conditions for Brazilian approval of the corporate tie-up.

Other stock movers: Eurazeo (LSE: 0HZC.L - news) completes sale of Elis shares at 22.01 euros/share; DFS Furniture (Frankfurt: DF0.F - news) says market remains very challenging​; Airbus to recoup some engine nacelle work from suppliers; Poste Italiane (Dusseldorf: 29884131.DU - news) says parcel strike hitting it hard.

MSCI’s main index of Asia-Pacific shares, excluding Japan, is just about flat and Tokyo shares closed up 0.01 percent, having hit a two-year high on Wednesday.

Emerging market stocks are flat after four days of gains and most emerging currencies are in the red against a slightly firmer dollar, with the rand down almost half a percent following a central bank warning that failure to tackle corruption was damaging economic recovery.

Sovereign emerging bond yield spreads are however continuing to outperform Treasuries with spreads at a new three-year low.

On local government bonds, Indian yields spike to the highest since June a day after the central bank leaves interest rates unchanged. Average yields on the main local debt index, GBI-EM, stay above 6 percent.

Czech crown continues to zero in on its November 2013 low... September inflation data is due, which is likely to set the stage for another rate rise before end-year.

Oil prices are also flat, with Brent crude down 3 cents a barrel at $55.77.

* Australia Aug trade balance, retail sales

* Europe corp events: Norwegian Airline monthly traffic, EDF (Swiss: EDF.SW - news) analyst meeting

* UK auctions 2023 gilts

* Spain govt bond auction

* Czech Sept inflation

* US Aug trade balance, weekly jobless claims

* Mexico Sept consumer confidence

* Fed board member Powell and NY Fed chief Dudley speak in NYC; Kansas Fed chief George and Philadelphia Fed chief Harker speak in Austin; SF Fed chief Williams speaks in St Louis (Editing by Toby Chopra)