MORNING BID EUROPE-Zelenskiy show a ratings hit for Ukraine vote

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

LONDON, July 19 (Reuters) - The party of Volodymyr Zelenskiy, the comedian-turned-politician who became Ukraine's president, looks to have unstoppable momentum ahead of Sunday's parliament vote. Latest polls show his Servant of the People party -- named after his TV show -- has extended its lead over other groups to ride high at over 40%. The next biggest party has barely more than 10%, meaning Zelenskiy could win commanding control of the assembly for his promises to crack down on corruption and lift living standards.

City analysts are gradually notching up their probabilities for a no-deal Brexit. The latest Reuters poll this month put the median forecast at 30%, up from 25% in June, as Boris Johnson gets closer to entering 10 Downing Street. The prospect of the two sides securing some form of deal on future trade ties is still considered the most likely outcome: that, however, is a scenario which would rely on either Johnson or the European Union climbing down from stances that are currently incompatible with any such deal.

Turning to shaky eurozone government watch, developments are afoot in both Italy and Spain. As improbable as it sounds, a row over who did and did not vote for Ursula von der Leyen as European Commission chief has triggered more talk of a split between the two ruling coalition parties in Rome; 5-Star's Luigi Di Maio says he is hoping to meet League leader Matteo Salvini on the latest crisis today. In Madrid, meanwhile, Spanish Socialist leader Pedro Sanchez's hopes of staying on as prime minister suffered a setback last night when supporters of the Podemos voted to back him only if the far-left party gets key roles in his future cabinet -- something he has ruled out.

MARKETS AT 0655 GMT It’s pretty clear that central banks are preparing for a heavy cutting cycle. The only questions are whether it starts this month or later and whether cuts will start at a normal pace (25 bps for the Federal Reserve and 10 bps for the European Central Bank) or whether the banks will opt for bigger moves to pre-empt an economic downturn. Comments from the New York Fed's John Williams suggested yesterday the cut would be bigger and sooner, though the Fed later rowed back a bit on that view.

Japan's inflation data today underwhelmed coming in at two-year lows with core inflation at 0.5%. That means the Bank of Japan is likely to cut rates, too, possibly from September. Years of negative rates and money printing haven't lifted inflation, so it's unclear whether more of the same can do the trick. Anyway the promise of a rate-cut deluge has done the trick already to some extent – the dovish comments by officials Williams and by Richard Clarida late on Thursday sent Wall Street higher and pushed the dollar and Treasury yields lower -- the U.S. yield curve has steepened in recent days. The gap between three-month and 10-year yields is more or less zero; it was as wide as 30 bps a few weeks ago.

That has kept the momentum going in Asia and Europe, with world stocks up 0.3% and Asia enjoying even bigger gains of 1% to 2%. On currency markets, the dollar reacted dramatically to the comments from the Fed’s Williams, falling half a percent against a currency basket to two-week lows and 0.6% against the yen. This morning, it’s climbed off those levels; the yen has weakened today, down 0.3% to the dollar.

The dollar's weakness has lifted emerging currencies to nearly four-month highs, notwithstanding rate cuts across the developing world as well – South Korea, Ukraine, Indonesia and South Africa have all cut rates this week.

In Europe, markets are also mindful of rumours, after a Bloomberg source-based report, that the ECB could be looking to revamp its inflation target, which would allow it to cut rates and hold them low for longer. Those hopes have extended a euro zone bond rally, with peripheral Europe enjoying the biggest gains and German 10-year Bund yields set to end Friday with their biggest weekly decline in seven weeks. Italian 10-year BTP yields, down almost 20 bps this week, are poised for their seventh straight week of declines. The euro slipped after the Bloomberg report but rebounded more than 0.4% later on Thursday as the dollar reacted to Williams’ comments.

Sterling rallied (its best day since early May) after lawmakers voted to make it harder for the incoming prime minister to prorogue parliament to push through a hard Brexit. The respite was brief, however. The pound, which has fallen some 6% since mid-May, resumed its decline this morning against the dollar and euro.

With little significant data due today, earnings remain in focus. BlackRock, State Street and Amex post results later in the day. Markets have been rattled by a sharp drop in Netflix shares, but profits for S&P500 companies are expected to rise 0.6% in the second quarter, which is better than expectations when the earnings season began. Microsoft shares soared to record highs after forecast-beating results and they are up 2.5% in Frankfurt this morning.

European equity markets are regaining some of the ground lost yesterday, rising more than 0.5%. News that U.S. and Chinese officials spoke by telephone on Thursday as the world's two largest economies try to end a year-long trade war helped the market shake off yesterday’s bad mood. The pan-European STOXX 600 index is flat on the week. London's oil- and mining-heavy blue chips may get an extra lift today from higher crude and gold prices.

Hot on the heels of SAP's poor results, Germany's No. 2 listed tech company Software AG, has lowered the outlook for its integration software division as it reported a 9% drop in second-quarter operating profit. That's sending its shares down by 5% in pre-market trading. Microsoft's results and rally after the closing bell may help soothe some nerves.

Bad news from the auto industry continues - auto parts maker Plastic Omnium has cut its profit margin outlook, warning it doesn't see a rebound in global automotive output in the next two years. Its shares are seen down 2%. But investors appear to be welcoming news that BMW named engineer Oliver Zipse as its chief executive. Its shares are higher in early Frankfurt trade

Publicis shares are expected to fall after the world's third-biggest advertising group cut its 2019 revenue growth guidance after reporting a weaker-than-expected second-quarter as it struggles to revive sluggish sales in the United States. One dealer pegged its shares down 5%; it may drag WPP down with it.

In dealmaking, the world's second-biggest gold miner, Barrick Gold Corp, has agreed to buy Tanzania-focussed Acacia Mining in a deal that values it at 951 million pounds. Acacia's shares could rally as much as 25%, one dealer said. AB Inbev will likely fizz after agreeing to sell its Australian assets to Asahi in a bid to cut debt after shelving an IPO of a unit a week ago.

The prospect of rate cuts is boosting gold, which has touched six-year highs. Brent futures are up more than 2% after reports the U.S. Navy downed an Iranian drone, although crude is still on track for a weekly drop.

With the dollar capped, emerging-market stocks were positive and emerging-market currencies rose to a four-month high.

South Africa's rand is in focus after scaling a five-month peak following the central bank's interest rate cut on Thursday. The Brazilian real also surged to a five-month high on Thursday. Turkey's lira rallied, then reversed its gains, after unclear comments from U.S. President Donald Trump on whether his administration was looking at imposing sanctions. Upcoming events/data/themes for market reports on Friday: Japan June inflation Europe corp events: Bolliden, Fortum, SSP, Saab, Stora Enso Germany June producer price inflation Belgium July consumer confidence US earnings: Blackrock, State Street, Amex, Citizens Financial, Schlumberger. US July University of Michigan consumer sentiment index Canada May retail sales Bank of Japan chief Kuroda speaks in NYC; Boston Fed chief Rosengren speaks in NYC, St Louis Fed chief Bullard speaks in NYC Sovereign credit rating reviews – S&PGlobal reviews Russia, Czech Rep, Kuwait, Andorra. Moody’s reviews Germany, Malta; Fitch reviews Germany, Slovenia, Azerbaijan.

(Editing by Larry King)