MORNING BID EUROPE-Tough-talker Valls eyes place in Macron's team

LONDON, May 9 (Reuters) - Former French PM Manuel Valls has signalled he wishes to join President-elect Emmanuel Macron's political movement in the June elections in the lower house of parliament. That would be quite a big scalp for Macron although Valls was never totally at home in the Socialist Party (nor left-wing voters) with his centrist economics and tough talk on law and order. Separately - and showing what a broad church Macron could seek to build - leading conservative Christian Estrosi said he was offered but turned down a cabinet post in the new government.

Meanwhile French budget figures for March show one of the constraints Macron and his new team will have to deal with: its deficit has risen a good 2 billion euros from this time last year to hit 29.6 billion euros. That came alongside a mixed Bank of France report on the economy, with expectations of a decent 0.5 percent growth in the second quarter tempered by downbeat expectations in the big services sector.

As Britain's campaign for the June 8 election accelerates gradually, PM Theresa May is promising to introduce a cap on domestic energy prices that would cut them for around 17 million families if she is re-elected. Polls show her Conservative Party around 20 points ahead of the Labour Party, whose leader, Jeremy Corbyn, has insisted he won't step down even if defeated.

MARKETS AT 0755 GMT

Wall St’s ‘fear gauge’, the CBOE’s ViX index of implied volatility, closed at a 24-year low last night. If nothing else, it underlines just how stable the economy, earnings and equity prices have been in the face of considerable political uncertainty.

With French elections lifting the immediate risk of another financial firestorm in Europe, the underlying business activity picture looks ok. Contrarians reasonably argue that these big troughs in the Vix presage turbulence to come – the index, below 10 percent, is back to where it was on the eve of the credit and banking storm 10 years ago.

But it’s hard to see where something of that magnitude is lurking right now - short of a nuclear confrontation between the West and North Korea.

While the risk of the latter is very much on the radar, markets look set to stay focused instead on what they can see in front of them rather than speculating on worst-case scenarios.

Actual U.S. earnings growth is coming in at more than 14 percent for Q1 and is a whopping 21 percent for euro zone companies half way through the earnings season so far.

Perhaps the more prosaic threat to record high equities comes from stepped-up central bank tightening. Although Fed hawkishness hasn’t disturbed stock markets much to date.

Futures markets now put the chances of a June rate rise at more than 80 percent and 10-year U.S. Treasury yields pushed higher overnight to just under 2.40 percent.

Central bank tightening in China is having more of a dampening effect on markets there of late, although Shanghai closed flat overnight and HK was up 0.6 percent.

The European Central Bank has yet to signal any fresh move to taper is massive bond-buying stimulus – although many expect its guidance on that to shift early next month too.

Positive economic surprises continue to stream in for the euro zone, in the meantime.

The drop in March German industrial production released earlier was smaller than expected. After a bout of profit taking for euro stocks and the euro after the expected win for centrist Macron in Sunday’s French elections, euro stocks are expected to open slightly higher again today and euro/dollar hovers just above $1.09.

The South Korean won slipped half a percent against the dollar as the country voted in presidential elections, while the local stock market was closed after hitting record highs on Monday.

Brent crude is firmer at $49.44.

* Europe corp events: Adecco (Swiss: ADEN.VX - news) , K&S (IOB: 0Q2N.IL - news) , GEA Group (IOB: 0MPJ.IL - news) , Fraport (IOB: 0O1R.IL - news) , Aker (LSE: 0MJX.L - news) , Zalando (Swiss: OXZALG.SW - news) , Endesa (LSE: 0N9G.L - news) , Continental (IOB: 0LQ1.IL - news) , Pandora (LSE: 0NQC.L - news) , Commerzbank (Xetra: CBK100 - news) , Dialog Semi, Campari (Milan: CPR.MI - news) , Mediaset (LSE: 0NE1.L - news) , Vonovia (Milan: VNA.MI - news) , Uniper (Swiss: UNIPE.SW - news)

* Swiss April jobless

* German March industrial output, trade data

* US Q1 earnings: Aon (NYSE: AON - news) , Allergan (Frankfurt: A1W5NE - news) , Duke Energy, Discovery Comms, CBOE

* Mexico April inflation

* Boston Fed chief Rosengren speaks in NYC

* US Treasury auctions 3-year notes (Editing by Robin Pomeroy)