MORNING BID EUROPE-September gets under way, uncertainly

* A look at the day ahead from EMEA markets editor Mike Dolan. The views expressed are his own.

Sept 2 - World markets have kicked off September in an equivocal mood despite the latest tit-for-tat tariff hikes between the United States and China and the expected Brexit drama of the week ahead in the UK. Part of the hesitation is due to the Labor Day holiday for U.S. markets later, but a surprising bounce in the Chinese private-sector Caixin manufacturing survey in August back into expansionary territory for the first time in three months has taken the edge off early equity selling in Asia. Shanghai stocks gained more than 1%, although another weekend of violent protests in Hong Kong saw the Hang Seng benchmark underperform again with losses of 0.7%. Tokyo’s Nikkei was down 0.4%; South Korea’s Kospi rose. U.S. stock futures were in the red, but European markets were expected to open higher. China’s offshore yuan was a touch weaker 7.17 per dollar but did not breach last week’s lows. Much of the currency market's attention was on euro/dollar’s slide below $1.10 on Friday for the first time in more than two years. The pair was pushing lower again first thing on Monday. Without an immediate trigger, the focus is already on the Federal Reserve and European Central Bank meetings later this month. Fed officials indicated they were reluctant to engage in deep interest rate cuts just yet, despite pressure from U.S. President Donald Trump to do so. A quarter-point Fed rate cut is now fully priced for September. Chances of a half-point cut were only one in five.

Alongside ECB speculation, attention in Europe is on political developments. The UK parliament returns from summer recess tomorrow. It will have just a week to act to frustrate PM Boris Johnson’s push for a possible no-deal Brexit on Oct. 31 before being suspended until mid-October. Legal action against the parliamentary suspension is expected to begin on Tuesday as well, with opposition Labour Party leader Jeremy Corbyn due to make a keynote speech on a moves to prevent a no deal later on Monday. Johnson has threatened rebels within his own party with expulsion if they vote against the government on any no- confidence measure or for moves to stop no deal – raising speculation that his resulting likely loss of his one-seat working majority means a snap election might be called as soon as this week. Sterling held firm, with traders focusing on the net impact of all the week’s developments and the growing chances of yet another delay in the Brexit deadline.

Elsewhere, U.S. Treasury yields were steady, but the yield curve from both three months and two years out to 10 years remained inverted. Italian 10-year sovereign yields held just above 1% after plunging below that level for the first time last week as a new Italian government coalition formed without the League party of former deputy PM Matteo Salvini. In emerging markets, Argentina’s financial crisis worsened over the weekend as the government imposed foreign-exchange controls to limit the peso’s slide and the loss of the country’s hard-cash reserves.

In European corporate news, Germany's TLG Immobilien bought a 10% stake in rival Aroundtown for $1.14 billion and said it was considering a potential deal with the company. The purchases values the shares at 8.3 euros per share, a 10% premium to Friday's close, and shares were trading up about 7%. TLG shares were up about 2.6%. The real estate sector rallied on Friday after a German newspaper reported the rent freeze planned by Berlin's regional government might be less strict than previously expected.

Airbus SE may get a lift from fresh concern that Boeing's 737 MAX will be grounded for longer than expected. Citing government and pilot union officials, the Wall Street Journal said friction between the company and international air-safety authorities threatens a new delay in bringing Boeing aircraft back into service. On Sunday, American Airlines extended its cancellations of 737 MAX flights through Dec. 3 but said it remains confident that the aircraft will be approved to fly again this year, following new software and pilot training. Worries about delays could hurt big users of the aircraft in Europe like TUI and Ryanair. An Italian court has ruled in favour of French media giant Vivendi in the ongoing legal wrangling over the restructuring plan for Mediaset, although the decision was not enough to scupper the deal. * August manufacturing PMI business surveys from around the world

* UK’s opposition Labour Party leader Corbyn speaks on strategy to avoid ‘no-deal’ Brexit

* Bank of England policymaker Brazier speaks in Edinburgh

* U.S. Vice President Pence visits Ireland

* South African finance minister briefs reporters on the upcoming World economic forum in Johannesburg

* U.S. markets closed for Labor Day holiday (Editing b Larry King)