MORNING BID EUROPE-Strikes pull French growth to zero in Q2

* A look at the day ahead from European Economics and Politics Editor Mark John and Nigel Stephenson, specialist editor, EMEA markets. The views expressed are their own.

LONDON, July 29 (Reuters) - French economic growth fell unexpectedly to zero in the second quarter from the previous three months on weak consumer spending and a drop in business investment. The government is putting a brave face on it, blaming one-offs such as recent strikes in refineries and for now sticking with its 2016 growth forecast of 1.5 percent. Q2 figures for the eurozone as a whole come later. More important at this stage is how the Q3 shapes up in the wake of the Brexit vote. For now, there seems to be a disconnect between some of the negatives coming out of the UK -- witness July consumer confidence suffering its sharpest drop since 1990, according to a GfK (Swiss: GFK.SW - news) survey -- and the relatively resilient euro zone numbers which showed an improvement in confidence factors this month. Early days still.

Spain's acting Prime Minister Mariano Rajoy said last night he had accepted a mandate from the King to form a government, but warned he might fail. That's because the Socialists and left-leaning Unidos Podemos are still saying they will oppose him in a confidence vote; even to have a go at running a minority government he would need them to abstain, at least initially.

Poland, which could prove one of the key players in negotiations with Britain over the terms of its future relationship with the EU, spelt out what its priority in the talks would be. After meeting her British counterpart Theresa May, Poland's Beata Szydlo said the aim would be to clinch the best deal possible for those of the 800,000 resident Poles in Britain who want to stay there.

MARKETS AT 0645 GMT

The Bank of Japan's stimulus package disappointed investors who had possibly become over-excited in the past week, bandying about some staggeringly large numbers. In the end, the BOJ almost doubled its annual purchases of ETFs (Shenzhen: 395013.SZ - news) , by $58 billion, a move dismissed by some as likely to have no impact on inflation. Like the ECB last week, the BOJ said it would conduct a thorough assessment of measures already taken, suggesting the stimulus programme may be overhauled. The yen soared against the dollar, rising as far as 102.825 yen, the Nikkei dropped 2 percent, before bouncing back to close higher, and yields on Japanese government bonds soared. BOJ chief Kuroda says negative rates have worked well and that there is room for them to go deeper into negative territory. Yen last at 103.55 per dollar up 1.6 percent, also up 1.6 percent vs the euro. Dollar index is down 0.3 percent. JGB yields rose 11 bps to -0.18 percent, with a lesser knock-on impact on German and U.S (Other OTC: UBGXF - news) . debt. Bund yields rose 3 bps to -0.12 pct and 10-year Treasuries yielded 1.54 pct, up 3 bps.

Another heavy day of European earnings, with two of the continent's biggest banks in focus. Barclays (LSE: BARC.L - news) reported a 20 percent dip in first-half pretax profits despite improved returns in its core business, as the costs of selling and shrinking the bank's unwanted assets in a harsh economic environment took its toll on earnings. Switzerland's biggest bank UBS (LSE: 0QNR.L - news) posted a 14.5 percent year-on-year drop in second-quarter net profit on the back of lower earnings at its wealth management and investment banking businesses, but that fall wasn't as bad as the market had feared.

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

- Europe corp events: Barclays, UBS, BBV, Bank of Ireland (EUREX: 1269463.EX - news) , BBL, Banco Popular Espanol, Heidelberg Cement, Swiss Re (LSE: 0QL6.L - news) , Rexel (LSE: 0KBZ.L - news) , EdF (Paris: FR0010242511 - news) , ArcelorMittal (LSE: 0NSF.L - news)

- France Q2 GDP, July inflation, June consumer spending

- Spain Q2 GDP, July inflation, May c/a

- Italy July inflation, June jobless

- EZ flash Q2 GDP, flash July inflation and June jobless

- UK July consumer confidence, BoE June credit and mortgage lending

- ECB announces 2016 bank stress test results

- Russia rate decision

- Nigeria FX reserves

- Turkey Q2 tourism, June trade

- SAfrica June trade

- Norway June jobless

- US Q2 earnings: Exxon Mobil (Swiss: XOM.SW - news) , Xerox (Swiss: XRX.SW - news) , Aon (NYSE: AON - news) , Tyco, Merck (LSE: 0O14.L - news)

- US Q2 GDP, PCE, wages; July Chicago PMI, UMich sentiment

- Brazil June budget data

- S&P to review sovereign credit ratings of Slovakia; Moody's to review Slovakia, Bahrain; Fitch to review Spain, Croatia, Denmark; DBRS reviews Germany (Editing by Sonya Hepinstall)