MORNING BID EUROPE-Planes, Spain and Canada-EU pain in the frame

* A look at the day ahead from European Economics and Politics Editor Mark John, Chief Desk Editor Angus MacSwan, Markets Editor Mark Dolan. The views expressed are their own.

LONDON, Oct (Shenzhen: 000069.SZ - news) 25 (Reuters) - After decades of hesitations and indecision, the British government is expected on Tuesday to finally back the expansion of Britain and Europe's busiest airport, Heathrow. If confirmed in a statement due at 1130 GMT, that would represent the most ambitious and expensive of three options for increasing London's air travel capacity. What finally tipped the balance is likely to emerge later, but Britain will use the announcement to try to persuade the rest of the world that, post-Brexit, it remains very much open for business and determined to remain a major trading and business hub. Expect opposition however, from a range of folk from residents to Foreign Secretary Boris Johnson.

The decision by Spain's Socialists to abstain in a vote of confidence in centre-right Prime Minister Mariano Rajoy this coming weekend means that the country is days away from forming its first real government in 10 months. Some have suggested it has been business as usual despite the power vacuum in Madrid, but a closer inspection of what now awaits Rajoy reveals that is far from the reality. From small matters such as having to find candidates for no fewer than 44 open ambassador positions to major items such as reaching a budget deal that respects EU deficit rules, he will have his work cut out. That is even before he seeks to push ahead with reforms aimed at consolidating the post-crisis recovery, such as tax cuts or further labour market changes to encourage permanent hires.

Belgium has missed the Monday night deadline set to back a free trade deal between the European Union and Canada but the two sides are determined they can still break the deadlock before a summit scheduled for Thursday to sign off on the deal. "Together with PM @JustinTrudeau, we think Thursday's summit still possible," EU President Donald Tusk said in a tweet. Canadian Trade Minister Chrystia Freeland said "CETA isn't dead" but she sidestepped questions about what would happen if the EU failed to come to an agreement this week. The fact that the Belgian region of Wallonia has been able to block the deal is fodder for those who say the EU is hopelessly unwieldy ("Wallooney Tunes", according to the City AM headline), but it also shows the difficulties Britain might face as it tries to negotiate deals post-Brexit.

MARKETS-GLOBAL (0645 GMT)

A punchy Q3 earnings season stateside, which now has aggregate earnings there up more than 1 pct yr/yr in a first gain for five full quarters, is buoying US and world equity. And buzzing M&A activity is adding to the mood, with the AT&T (Sao Paolo: ATTB34F.SA - news) bid for Time Warner (Xetra: AOL1.DE - news) coming quick after the BAT/Reynolds saga. And in a week in which we expect to see annualized US GDP having accelerated to 2.5 pct in Q3 from 1.4 pct the previous quarter, there's reasonable grounds for optimism in stocks and more anxiety in bonds. Wall St stocks closed about half a percent higher on Monday, with the Nikkei225 leading Asia higher this morning and a setting a 6-month highs on the back of a weaker yen. European stocks are set to open slightly higher. But the coast is not clear. The relative stability has familiar counterpoints. With (Other OTC: WWTH - news) firebrand Republican candidate Donald Trump still trailing in the polls, the Fed's clear plan to raise interest rates in December is now on track and futures markets see about a 75 pct chance of that. The dollar continues to strengthen on that. And all the unintended consequences of another Fed hike come into view - none more so than the weakening of China's yuan to its lowest level in six years. Despite official protests, the risk of a sharp depreciation of the yuan has been a game changer in world markets over the past few years. Its influence on relative terms of trade across Asia and the world is now massive and will be watched closely for increased volatility and a resumption of the 'currency wars' theme. Euro/dollar is still stuck below $1.10, meantime, ahead of the release of the October German Ifo index later. Sterling was steady ahead of parliamentary testimonies by UK finance minister Hammond and Bank of England chief Carney. Busy earnings day as Q3 earnings season gets into full flow.

(Editing by Raissa Kasolowsky)