MORNING BID EUROPE-May Day in London; Spanish breakthrough?

* 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, July 13 (Reuters) - Theresa May will become Britain's second female prime minister later today, with David Cameron doing his final PM question time in the House of Commons and then formally resigning. Now (NYSE: DNOW - news) the focus will be on who gets key jobs such as the finance minister and the negotiator-in-chief on Britain's exit from the EU: the profile of Brexiteers in those positions could give some early clues as to how those talks will proceed. All in all -- and much to the relief of sterling -- the ruling Conservatives have managed to fill their leadership void with lightning speed, albeit simply because there turned out to be a dearth of viable candidates. Opposition Labour meanwhile faces protracted wrangling over its leadership, with Jeremy Corbyn if anything the favourite to cling on now that his name has been allowed to be on the ballot paper. If he does, the question is whether Labour centrists choose to remain in the party or create some new grouping of their own. With Theresa May signaling a moderate "One Nation" conservativism as her answer to the grievances about social injustice thrown up by the Brexit campaign, the centre ground of British politics could get very crowded.

Is a breakthrough finally in sight in Spain's political deadlock? The small, liberal Ciudadanos party said last night it will neither back nor block a government led by Mariano Rajoy's conservative People's Party (PP). The PP won a general election in June, the second in six months, but did not win a majority, so Rajoy must convince other parties to join a coalition or to at least abstain from any vote of confidence that could block it. Ciudadanos has not yet said how it would vote on any investiture vote for Rajoy on Wednesday.

MARKETS AT 0645 GMT

Judging by world equity markets, it's like Brexit never happened. Well almost. With Wall St setting new records, the MSCI (NYSE: MSCI - news) world index has more than regained all its losses suffered since the UK referendum on June 23. The simplest way of seeing it that we have no hard evidence yet of the economic fallout or confidence hit (and may not in full until July data is released next month), but have assumed a round of monetary and fiscal easing just in case. The Bank of England is widely expected to cut interest rates tomorrow, the UK Treasury is expected to ease fiscal targets, Japan's PM Abe has ordered a new round of fiscal stimuli and the ECB is expected to lean dovish again today as German is set to auction 10-year bunds with a zero coupon for the first time later today. The quick appointment of PM May in the UK has at least filled in some of the political vacuum and sterling, still down more than 11 pct since the vote, has now recovered about 5 pct from its low of last week. What's more, much of the incoming data on activity prior to the UK vote, including U.S (Other OTC: UBGXF - news) . payrolls, looked to be strengthening. Chinese June trade numbers will be key to watch later today. Sovereign bond yields have popped back a bit but remain down sharply post-referendum, reflecting both the changed monetary horizons and greater political risks in Europe. The U.S. presidential elections loom large still, although Democrat Clinton looks to have a firm lead and is closest to status quo. But, remarkably, Wall St's VIX 'fear index' is back under 13 pct and stalking its lowest level of the year. The U.S. earnings season is getting underway this week too, with U.S. banks, including Citi and JPM, due to report some rebound in Q2s vs Q1 on Thursday and Friday. Overnight, the Nikkei225 was up almost 1 pct on this week's yen unwind and fiscal stimulus hopes and after another 0.7 pct gain in the S&P500. HK and other regional Asia bourses were flat to positive. Euro/dollar was little changed at $1.1060. Brent crude slipped back below $48.

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

- China June trade

- Malaysia, Croatia interest rate decisions

- Europe corp events: Burberry, H&M, Icap (LSE: IAP.L - news) , Alsthom, Aker Solutions

- France/Italy/Spain final June inflation

- EZ May industrial production

- German 10-year bund auction

- Italy government bond auction

- US Q2 earnings: CSX (NasdaqGS: CSX - news) , Yum! Brands

- Canada rate decision, press conference

- Fed Beige Book released, Mester speaks

- US Treasury auctions 30-year bonds (Editing by Sonya Hepinstall)