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CORRECTED-LIVE MARKETS-Europe bleeds as Trump tweets

(Removing 'not' in the 1st paragraph of latest blog) * Euro zone STOXXE down 1.8%, as DAX falls 2.2% * Trump's tweets on trade deal hurt markets * London flat helped by BP, sterling weakness * Investors ready for expected rate cut tomorrow evening * Lufthansa hits turbulence after results * Oil & gas gains, travel & leisure fall Welcome to the home for real-time coverage of European equity markets brought to you by Reuters stocks reporters and anchored today by Josephine Mason. Reach her on Messenger to share your thoughts on market moves: rm://josephine.mason.thomsonreuters.com@reuters.net EUROPE BLEEDS AS TRUMP TWEETS (1207 GMT) It's getting worse here in Europe and tweets from Trump on trade deal are not helping markets. The trade-sensitive DAX is bleeding (-2.5%), pulling down rest of Europe. In a barrage of tweets, Trump said: "China is doing very badly, worst year in 27 - was supposed to start buying our agricultural product now - no signs that they are doing so. That is the problem with China, they just don’t come through." "My team is negotiating with them now, but they always change the deal in the end to their benefit." After those comments cars have zoomed past banks as the worst sectoral performers in Europe. "Europe seems to be taking the Trump tweets worse than Wall Street futures. Europe was already slumping on the back of some softer earnings, but that has clearly exaggerated since Trump's tweets," says OANDA senior market analyst Craig Erlam. The tweets have renewed worries about the state of the trade talks taking place in Shanghai this week as Fed governing council heads into its two-day meeting to discuss the state of the world's No. 1 economy. The market has soundly priced in a 25 bps cut based on expectations that the U.S. central bank will take into account the damage from the protracted trade war on the global economy. "You can bet your bottom dollar, Trump will be critical of the Fed tomorrow if it's 25 bps," a London-based trader says. (Thyagaraju Adinarayan and Josephine Mason) ***** BANKS PUT EUROPE ON COURSE FOR WORST DAY IN 2 MONTHS (1120 GMT) European shares have taken a turn to the worse and traders are scratching their heads. All county indexes are trading near their session lows after a fairly muted open with all sectors in the red except the defensive food & beverage index. Even the FTSE 100 has lost its shine as sterling is trying to find a floor, while the pan-regional STOXX 600 is now down 1%, set for its biggest daily loss in 2 months (see chart below). One London dealer describes the souring tone as "odd" with investors scrambling for a reason. "GBP is taking some of the blame, but it's all very discombobulated," he says. There doesn't seem to be a clear news trigger as investors face growing Brexit uncertainty and await developments in U.S.-China trade talks just as the Federal Reserve looks set to announce its first rate cut in a decade tomorrow. Even U.S. stock futures seem to be pretty resilient, dropping just 0.3%, amid the European equities rout. "Many seem to be surprised just how tough UK's new PM is talking... Many analysts still consider a no-deal scenario as less or unlikely therefore the closer we are getting to a no deal the more markets are likely to adjust," says Markus Huber, trader at City of London Markets. "Because all of this, markets in Europe are facing potentially several months of heightened uncertainty which makes any turnaround regarding economic growth in Europe unlikely which in turn is not completely priced into share prices," he adds. Banks are the biggest fallers, down 2.1%, and with the interest rate outlook on both sides of the Atlantic clouding even further their dim profitability prospects, that may not be too surprising. Data today from the euro zone provided little comfort about the state of the region's economy and that may just cement expectations of more ECB stimulus. "On one side, the Fed looks set for a rate cut at its July 31 meeting and on the other the ECB is oriented to support the continent's economy... I would expect the ECB to cut rates in September, introduce tiering and resume quantitative easing," says Andrea Scauri, equities fund manager at Lemanik in Italy. "In this phase, rate-sensitive asset classes are the most interesting," he adds. (Danilo Masoni and Josephine Mason) ***** ARE FTSE DIVIDENDS SAFE? (0930 GMT) The FTSE 100 is a paradise for investors looking for payouts in a world of sub-zero yields but Centrica's dividend cut today which adds to other high-profile disappointments earlier this year suggest investors should remain on alert. Marks & Spencer and Vodafone had both cut dividends by 40% each in May. Centrica shares hit a 21-year low today after the owner of Britain's largest energy supplier, British Gas, slashed its dividend by more than half and said CEO Iain Conn will step down in 2020 as operating profit fell nearly 50%. "There is more bad news for income investors as utility group Centrica joins the list of high-yielding companies slashing their dividends," says Russ Mould, investment director at AJ Bell. The FTSE 100 has a dividend yield of 4%, which has helped it offset Brexit jitters and is still well above those offered elsewhere globally, but as you can see in this chart there has been a downward trend, falling off 2004-highs. (Danilo Masoni) ***** OPENING SNAPSHOT: AHEAD OF FED, INVESTORS TAKE OFF RISK (0730 GMT) Investors are shunning riskier assets this morning as they lock in profits ahead of an expected U.S. interest rate cut from the Fed after the close tomorrow. The STOXX 600 benchmark has risen almost 16% this year as investors have piled into equities betting on increasingly dovish global central banks as the U.S.-China trade dispute weighs on global growth. The market is pricing in a 25 bps cut. A slew of poor earnings from Lufthansa, Bayer and Centrica are also shaking confidence. Travel & leisure are the weaker performer after Lufthansa cautioned that sluggish conditions are likely to last until the year-end as it reported a drop in profits due to higher fuel costs and competition over fares. The oil & gas index is one of only a handful of sectors in positive territory in early deals boosted by BP while investors are adding to positions in defensives and rate-sensitive sectors - food and beverage and real estate are up 0.1-0.2%. London is the standout winner, extending yesterday's stellar rally as its export-heavy constituents get a lift from the heavy losses in the pound, and BP rallies more than 3.6% after reporting better-than-expected results. Bernstein analysts say that's the company's tenth beat in a row. A sharp fall in Centrica (it's hit its lowest in more than 20 years) and Reckitt Benckiser after their results are taking some of the sheen off the blue chips, but BP and Shell are singlehandedly keeping the FTSE 100 in positive territory. Here's a glance at the U.S. market pricing in a rate cut and the opening indices snapshot: (Josephine Mason) ***** AT THE OPEN: EUROPE TAKES A BREATHER, LONDON RALLIES (0652 GMT) Investors are taking a breather this morning with most European stock futures indicating a flat open as they brace for the first U.S. interest cut in a decade expected tomorrow after the close. Breaking ranks with its euro-zone peers, London's stock futures have hit their highest in nearly a year in early deals and are currently up 0.2%, as a punishing rout in sterling amid deepening worries about a no-deal Brexit continues to lift its multinational constituents and after strong earnings from heavyweight BP. BP's underlying replacement cost profit, the company's definition of net income, exceeded a forecast of $2.46 billion, according to a company-provided survey of analysts. Dealers expect the shares to rise 2%. British household goods maker Reckitt Benckiser has reported lower-than-expected Q2 sales, hurt by a slowdown in demand for infant formula in the United States and China, and cut its full-year revenue target. Its shares are seen down 2%. Lufthansa shares are ekeing out small gains in early Frankfurt deals as the German airline reported weak Q2 results as expected. Q2 earnings were hurt by price competition on short-haul routes in Germany and Austria as well as rising fuel costs. Bayer has become the latest agricultural supplies company to be affected by flooded farms in the United States and by trade disputes, saying its full-year earnings target has become harder to reach. Its shares are down 0.6% in early trade. Overnight Toronto-listed fertiliser company Nutrien blamed the same problems for its quarterly earnings miss and cut to its full-year profit forecast. In healthcare Fresenius shares are up more than 2% after the German company raised its FY revenue target, citing solid Q2 performance of all units, even as results of its key dialysis business came in slightly below expectations. Dialog Semiconductor's Q2 revenue has exceeded expectations, the latest European chip company to beat market consensus, although dealers say its outlook which pegged Q3 revenue below Q2 levels and a decline in FY revenue was disappointing. Its shares are higher in pre-market trading in Frankfurt. In dealmaking, private equity appetite for UK and European assets continues apace. BBA Aviation has sold its Ontic aircraft parts and services unit for an enterprise value of $1.37 billion. A trader says that's a tasty premium to the price it paid more than 10 years ago for the business who sees the shares rallying as much as 7%. Some UK headlines: British Gas parent Centrica CEO to step down, dividend slashed Greggs' vegan sausage rolls drives 58% rise in profit UK financial watchdog proposes contingent charging ban on pensions advice BRIEF-Provident Financial CFO Steps Down For Health Reasons BRIEF-Fresnillo PLC Posts HY Profit For Period Of US$70.9 Mln, Down 69.1% BP Q2 profit of $2.8 bln above expectations Jupiter H1 assets boosted by market gains, outflows slow Reckitt Benckiser sales miss as China infant formula demand falls BBA Aviation sells aircraft parts unit in $1.37 bln deal ON OUR RADAR: LUFTHANSA, HEIDELBERGCEMENT AND BAYER (0558 GMT) There's a slew of heavyweight German corporate earnings to digest this morning from Lufthansa, to HeidelbergCement to Fresenius and Bayer. The pain over ticket prices is unlikely to ease any time soon, was the message from Lufthansa which Tuesday posted a decline in second-quarter earnings, hurt by price competition on short-haul routes in Germany and Austria as well as rising fuel costs. HeidelbergCement, the world's No.2 cement maker after LafargeHolcim, posted a slight rise in Q2 core earnings, but said market dynamics had weakened slightly. Its shares are slightly higher in pre-market. Bayer became the latest agricultural supplies company to be affected by flooded farms in the United States and by trade disputes, saying its full-year earnings target has become harder to reach. Healthcare group Fresenius has raised its FY revenue target, citing solid Q2 performance of all units, even as results of its key dialysis business came in slightly below expectations. Dialog Semiconductor's Q2 revenue exceeded expectations, the latest European chip company to beat market consensus, although dealers say its outlook which pegged Q3 revenue below Q2 levels and a decline in FY revenue was disappointing. Its shares are higher in pre-market trading in Frankfurt. Here are your early headlines: HeidelbergCement confirms outlook despite slightly weaker market Bayer says 2019 profit goal becoming a stretch Lufthansa posts drop in Q2 earnings on rising fuel costs and price wars Fresenius raises full-year outlook after Q2 meets expectations Fresenius Medical Care confirms 2019 targets Top Metro investors to join forces after rejecting takeover offer GAM Holding appoints BlackRock exec Sanderson as CEO Sports Direct blames results delay on eleventh hour Belgian tax bill Grant Thornton to quit as Sports Direct auditor over 674 mln euro tax bill -FT Leoni scouts market for bidders for wire and cables division - sources Spain’s BBVA placed under formal investigation in spying case UBS close to settling in Italy money-laundering probe - sources (Josephine Mason) ***** THE WAIT IS ALMOST OVER (0524 GMT) The U.S. Federal Reserve's much-anticipated July meeting is nearly upon us when the U.S. central bank is expected to cut interest rates by 25 bps, its first decline to borrowing rates in a decade. The results of the two-day gathering of the governing council which kicks off today will be announced after the close tomorrow. Until then, dealers say they expect investors to stick to rate-sensitive assets like bonds and in equities, bond proxies like utilities and telecoms, which had a decent rally yesterday. The cut "comes at a moment when the GDP grows above 2%, the unemployment rate is at the lowest level in fifty years, the stock market is on fire with major US indices renewing record after record and the treasury bonds rally," says Ipek Ozkardeskaya, senior market analyst at London Capital. "In theory, the US economy doesn't necessarily need an easier monetary policy, but the Fed will point out the U.S.–China trade war and slowing global demand to justify a 25-basis-point action, along with two or more rate cuts down the road." IG financial spreadbetters expect London's FTSE to open 22 points higher at 7,709 as the blue-chip index extends yesterday's gains after the pound deepened its losses overnight hitting its lowest since March 2017 amid growing worries about the possibility of a no-deal Brexit. The index had its best day since February and hit its highest level in a year yesterday while the rest of the region saw only small moves. Frankfurt's DAX to open 21 points higher at 12,439 and Paris' CAC to open 9 points up at 5,610, following gains overnight from Asia. The Bank of Japan kept rates unchanged overnight but signalled a readiness to expand stimulus if a global slowdown threatens the country's economic recovery. (Josephine Mason) ***** (Reporting by Danilo Masoni, Josephine Mason and Thyagaraju Adinarayan)