MORNING BID EUROPE-Spanish stalemate over, tensions not

* 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, Oct (HKSE: 3366-OL.HK - news) 31 (Reuters) - Fresh from a successful vote of confidence at the weekend, Mariano Rajoy is sworn in for a second term as Spanish prime minister today, breaking a deadlock that has seen Spain without a government for over 10 months. A first crucial test will be Thursday's unveiling of a new cabinet that must build cross-party support to pass reforms in a still very fragmented and hostile parliament.

Media speculation about the future of Bank of England chief Mark Carney escalated at the weekend, first with reports he was close to announcing he would not seek an extension post-2018, then an FT report saying he had told friends he would. Attention will focus now on whether he will say something at a scheduled rate-setting meeting on Thursday. Carney made himself unpopular among some pro-Brexit Conservatives for warning of the negative fallout of Britain leaving the EU. Others -- including senior government members -- would prefer him to stay.

MARKETS AT 0755 GMT

Clinton, Carney and crude dominate market thinking first thing Monday in a big week for G7 central bank meetings. Markets are juddering after Friday's news that the FBI will open a new investigation into Democrat candidate Hillary Clinton's use of a private email sever while secretary of state, with little over a week to go to the presidential election. While that's seen her opinion poll lead over Donald Trump narrow to within a couple of percentage points in some polls, the initial market hit does not seem to have extended much into Monday. Asian stock markets are slightly in the red after Wall St losses on Friday, though the latter had been building all week on Fed thinking and a bond market swoon. The so-called 'Trump thermometer' -- Mexico's peso -- has also steadied after retreating to mid-October levels on Friday. The dollar, which has been rising over the past week on hardening December Fed rate rise expectations, has recovered some of Friday's lost ground overnight. Ten-year US Treasury yields are also nudging higher again. One immediate way of looking at the U.S. elections is that a Clinton win would be less disruptive to existing policy assumptions than a Trump victory and the reduced volatility will make it more likely the Fed will pull the interest rate trigger before year-end.

News (Other OTC: NWSAL - news) that German retail sales fell 1.4 percent in Sept, their sharpest fall in two years, will be a dampener in a holiday-hit trading week in parts of Europe. Newspaper speculation about Carney will dominate sterling thinking first thing, but the pound was steady on Monday so far, hovering just under $1.22. The other influence for the morning was Brent crude's slip back below $50pb on lingering doubts about a comprehensive agreement between OPEC and non-OPEC members on supply cuts next month. This bears close watching given the back-up in bond yields last week was in part a result of shifting inflation forecasts due to oil's recovery. Eyes will also be on a firmer South African rand, with a news conference scheduled for 0830 GMT by the state prosecutor that has fueled speculation that charges against finance minister Gordhan will be dropped. Euro zone flash GDP and inflation at 10 GMT, inflation expected to inch up to 0.5 pct from 0.4 pct but ECB expected to look through it.

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

- Europe corp events: WPP (Frankfurt: A1J2BZ - news)

- Germany Q3 GDP

- Germany, Spain Sept retail sales

- Italy Oct inflation

- UK Sept credit, mortgage lending

- EZ flash Oct inflation, flash Q3 GDP

- Turkey Q3 tourism revenues, Sept trade

- SAfrica Sept trade

- Nigeria Oct FX reserves

- Israel Aug industrial output, Q3 jobless

- US Q3 earnings: Loews Corp

- US Sept PCE prices

- Canada Sept PPI

- Brazil Sept budget

- US Treasury (Editing by Sonya Hepinstall)