MORNING BID EUROPE-Markets go back and forth

* A look at the day ahead from EMEA markets editor Sujata Rao-Coverley. The views expressed are her own.

Aug 20 - Stock markets are seesawing-- Wall Street enjoyed a third day of gains following the government’s decision to delay restrictions on Huawei for another 90 days. Markets continue to eye headlines from Germany on possible spending stimulus. China’s new lending rate for companies came into effect, set six basis points below the previous rate. A Washington Post report suggests U.S. authorities are considering a payroll tax cut. All in all, markets appear cheered by signs policymakers will step up to support growth, including possibly using fiscal stimulus. On the other hand, world growth and trade remain under pressure. The Bundesbank warned yesterday of another German quarterly contraction, political risks continue in Italy, Britain and Hong Kong, and Federal Reserve Chairman Jerome Powell my use his Jackson Hole airing on Friday to dash hopes U.S. interest rates will be cut by 50 or 75 basis points by the end of the year. Bond yields have steadied after rebounds on Friday and Monday – Treasury yields have also been lifted by news the United States might issue 50- and 100-year debt. So far, world stocks look set for a third day of gains, and European and U.S. shares are marked to open higher. Asian markets rose around half a percent and Chinese shares barely reacted to the new lending rate.

The bond yield bounce has helped the dollar. It touched a three-week peak against a basket of currencies and stood well off recent seven-month lows against the yen. It also rose to two-week highs versus another safe-haven asset, the Swiss franc. The yuan stands just off a one-week low but higher-risk currencies are enjoying a rally, with the Aussie dollar up 0.4% after the Australian central bank's meeting minutes suggested the bank wasn’t in a hurry to cut interest rates again. But alongside the thinner summer liquidity, markets are in a holding pattern before the Jackson Hole forum where Powell will deliver a speech that may signal what the interest rate path will be. But another Fed rate-setter, Boston’s Eric Rosengren, reckons rates don't need to fall further; in fact, that could worsen the next downturn, he argues.

Sterling sellers appear to be taking a breather, allowing the currency to stabilise above $1.20, as expectations grow that the opposition parties and Tory rebels will stop no-deal Brexit and as PM Boris Johnson heads off to meet European leaders at the upcoming G7 meeting. The more immediate issue is Italy, where snap elections could be held if parliament approves a no- confidence vote against PM Giuseppe Conte’s government. Conte is to address the upper house today. Italian yields are up 2 basis points but still near recent two-and-a-half-year lows, with many reckoning an autumn election remains unlikely.

European stock futures have reversed their early gains and are now broadly lower with the exception of the FTSE, where they're up 0.2%. A spot of profit taking was inevitable after the benchmark STOXX 600 rose 2.5% over the past two sessions, its best two-day winning streak since early January, recouping all the ground lost last week.

In corporate news, Hong Kong's richest man snapped up Greene King, the latest sign that cheap sterling is attracting foreign suitors even as Brexit turmoil deepens. Royal London Asset Management, which owns as 2.79% stake in Greene King, says the deal shows that UK assets as not a "no-go zone" for overseas companies. The $5.6 billion deal to buy the brewer may add some fizz to UK pub and restaurant stocks, which have been hurt by concerns about damage to consumers' spending power with the uncertainty over the exit from the UK. Greene King shares surged 50% yesterday afternoon on the news.

Osram Licht shares are higher after a report that Bain Capital and Carlyle are considering sweetening their bid for the German lighting company, trumping a deal from AMS and potentially triggering a takeover battle.

French supermarket retailer Casino is targeting a further 2 billion euros ($2.2 billion) of asset sales, stepping up plans to cut debt and improve financial performance. Its shares are seen rising 2% to 3% on the news.

Swiss watch retailers Swatch and Richemont may get a lift from data showing Swiss watch exports rose in July, reinforcing hopes that demand for luxury goods from Asia, and in particular China and Hong Kong, remains resilient despite the trade war and violent protests in Hong Kong. 9. Danish jewellery maker Pandora posted a 13.7% fall in second-quarter core profit, missing expectations, but it has maintained its full-year guidance. Its shares are seen falling 3%.

In other earnings, BHP shares have been under pressure in Australia and are expected to fall 1% in London after the company reported lower-than-expected profits and dividend, even though it included a record payout and its largest annual profit in five years.

The company also flagged global economic headwinds which would hit demand for its key commodities, iron ore and copper. Goldman has upgraded Antofagasta and Glencore to "neutral" from "sell".

Oslo-listed fish farmer Bakkafrost reported a smaller-than-expected drop in second-quarter core profit. Its shares are seen up as much as 4%.

In emerging markets, shares were up for a third session, rising 0.2%. Chinese blue-chip shares were still 0.2% weaker after the central bank lowered its lending reference rate in the first publication of a new interest rate benchmark. After a four-day rally, Hong Kong shares fell as Hong Kong leader Carrie Lam said talks with non-violent protesters would provide "a way out" for the Chinese-ruled city.

The yuan was down 0.2%, with added pressure from the new lending rate. South Africa's rand is down 0.4%, still weighed down by the growing likelihood of a credit ratings downgrade by Moody's.

Russia's rouble fell to its weakest since early May against the dollar on Monday. Tajikistan's currency fell the most against the dollar in more than two years after the rouble's decline. Turkey's lira is stronger, a day after the central bank reduced the required reserves ratio for banks with loan growth rates above 10%. In Argentina, markets reopen after being closed for a local holiday on Monday and could see some moves following an opposition leader’s pledge to re-negotiate the terms of IMF loans. SCHEDULED EVENTS AND DATA Japan auctions 20-year government bonds Hong Kong July inflation Europe corp events: Persimmon, John Wood, Pandora, Jyske Bank, Alcon Swiss July trade balance Germany July producer prices Italy’s senate due to consider government no-confidence vote UK Aug CBI orders Norway Q2 GDP Egypt central bank policy decisions

(Editing by Larry King)