MORNING BID EUROPE-Nagorno jitters up; "Panama Papers" fall-out

* 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, April 5 (Reuters) - Armenia's president has warned that an outbreak of violence in breakaway Nagorno-Karabakh risked spiralling into all-out war, after a third day of fighting between Azerbaijan and Armenian-backed separatists.

Theories abound about why hostilities have broken out precisely now, a couple of decades after the early 1990s war in which thousands were killed on both sides. Is this an attempt to deflect public attention from the Azeri economy, plunged into crisis by the sharp fall in oil prices of recent months? Or is the hand of Russia's Vladimir Putin to be detected, stirring trouble in the region as a way of riling Turkey, traditionally a friend of Azerbaijan?

Neither theory looks particularly plausible at this stage at least, with none of the protagonists having much to gain from conflict. While it remains unclear how exactly hostilities started late last week, this could simply have been one of those accidents waiting to happen, the result of some minor incident that happened to escalate.

Envoys from France, Russia and the United States are to meet in Vienna on April 5 for talks on how to stop the fighting but it is far from certain there will be any breakthrough.

The "Panama Papers" are causing various forms of discomfort in high places, including in Europe.

One Belgian newspaper has printed a map showing the location of 732 Belgian nationals cited in the documents; Iceland's prime minister Sigmundur David Gunnlaugsson is under domestic pressure to resign after the papers showed his wife owned an offshore company with big claims on the country's collapsed banks.

In France, Francois Hollande's Socialist government has jumped on the revelations to promise investigations into tax fraud, seeing the leak as a potential boon to its crackdown on tax-dodging. After his own budget minister resigned after a tax fraud in 2013, he'll no doubt be hoping none of his political allies are among those targeted this time.

MARKETS

Another yen surge and resultant Nikkei drop set the tone early on Tuesday. Dollar/yen has sliced below 111 to 17-month lows and Tokyo stocks have lost more than 2 percent, with the recent scaling back of Federeral Reserve rate rise expectations continuing to drag the dollar down further against the Japanese currency and created another headache for the Bank of Japan.

BoJ chief Kuroda has already been speaking this morning and said the central bank is ready to ease policy further, with one eye on market developments. And if the inflation outlook is a major concern for both the BoJ and ECB, then this week's ongoing retreat in oil prices will compound the problem.

Brent crude extended Monday's steep losses to as low as $37.36 this morning, with lingering hopes of some form of output freeze dissipating again.

Elsewhere, market messages were more mixed. Although Wall Street closed in the red, Shanghai was up more than 1 percent but Honk Kong was down by about the same amount. Seoul was up almost one percent, but Jakarta was down.

European stocks were set to take the Japanese lead and futures point to losses of about 1 percent. Lousy German orders data won't help.

India cut interest rates, meantime, while Australia left rates unchanged.

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

* Global March services PMIs

* Europe corp events: Tate & Lyle (LSE: TATE.L - news) trading statement, AA results

* German Feb industrial orders

* OECD survey of German economy

* EZ Feb retail sales

* IMF chief Lagarde, Bundesbank chief Weidmann speak in Frankfurt

* Austria govt debt auction

* BoE (Shenzhen: 200725.SZ - news) publishes record of latest FPC meeting

* Sweden Feb industry production

* Ireland March jobless

* Russia March inflation

* US Feb trade data, Canada Feb trade

(Editing by Jeremy Gaunt)