LIVE MARKETS-Asset managers: Less-liquid funds and growing risks

* European stocks sink after Trump's tariff pledge; STOXX 600 down 2.3% * Moves deepens worries about U.S.-China trade dispute * DAX down more than 3%, on track for worst day since December * Miners, cars and tech top fallers * BA gets lift-off after results 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: josephine.mason.thomsonreuters.com@reuters.net ASSET MANAGERS: LESS-LIQUID FUNDS AND GROWING RISKS (1422 GMT) Fund ratings at Woodford and Switzerland's GAM, and sudden redemptions in Natixis' H2O all highlight growing risks as investors are chasing yield in a low interest rate environment via less liquid assets, Morgan Stanley analysts write in a note today. Recent issues were mostly due to funds providing daily liquidity but invested in less liquid assets. Neil Woodford is facing the wrath of regulators, lawmakers and investors after his $4.5 billion flagship fund was frozen in June because it could not meet client redemption requests. "Recent events at GAM, Woodford and H2O highlight the challenges that liquidity is likely to pose as we move late cycle," the analysts say. That said Morgan Stanley also points out the increased investor attention on ratings agency action. H2O was a example, where redemptions accelerated after Morningstar placed an H2O fund "under review". But, Morningstar is now reviewing the way it rates these funds and is expected to finish overhauling it by October, MS says. "Morningstar analyst ratings are widely used by the investment advisory community and the fund rating suspension preceded redemption pressures at H2O. An overhaul in Morningstar's rating system and a new liquidity profiling tool in testing could suggest chance of greater movement in fund ratings going forward." On Europe versus U.S. funds: * MS says U.S. has more stringent regulations than Europe * "Level of rates and yield in Europe fosters even greater relative risk taking to access returns" * "European markets tend to be shallower and less liquid given their scale and more fragmented nature" (Thyagaraju Adinarayan) ***** AUGUST, A LESS-THAN-AUGUST MONTH (1225 GMT) Global stocks are taking a beating today, but don't cut short your summer holiday just yet. An analysis of past performance of the MSCI global equity index, which tracks shares in 47 countries, shows this isn't that unusual for August. Equities have on average lost 1.1% in August over the past 30 years, according to a Reuters analysis of stock market data. The performance ranges from a loss of 14.2% in 1998, 9.4% in 1990, 7% in 2015 to gains of 4.6% in 1993 and 3.4% in 2009. The chart below shows the average index reading since 1987: So you can head to the beach with your lilo rather than your laptop! (Josephine Mason) ***** 'STABLE AND REASSURING': Q2 EARNINGS (1151 GMT) Several strategists (SocGen and Morgan Stanley) have recently cautioned about the rather bleak outlook for earnings in H2 and onwards, but Barclays' European equity strategist Emmanuel Cau has struck an upbeat note in his assessment of results season so far. Guidance from companies in the U.S. and Europe appears "stable and reassuring", he says. That's probably rather comforting for investors reeling from the shock of U.S. President Trump announcing plans to whack China with even more tariffs next month, escalating the trade war and triggering a bloodbath in equities this morning. Anyway, with two thirds of companies' reports in, Cau's analysed performance so far by sector. Here his main findings: * A majority of companies raising or maintaining guidance (93% in Europe and 87% in US) * Both EPS and sales growth are better than expected in the U.S., at +5.8% and 5.1% y/y, respectively, but numbers are softer in Europe, at -2.6% and +1% * Cyclicals have reported lower growth and fewer beats than Defensives in the two regions, while results for Financials have come above expectations. Amid the ongoing slowdown in activity, corporate guidance remains generally upbeat but EPS revisions are negative. * Staples, healthcare and utilities have recorded the highest proportion of earnings beats and positive EPS growth * Tech remains the only silver lining in cyclicals outperforming the market on EPS beats and growth * Materials, industrials, consumer discretionary and communication services numbers look rather soft, with a small number of beats and dull EPS growth * Financials numbers in Europe so far have been reassuring with healthy EPS beats and better than expected, albeit with negative growth Also see: Enjoy your summer holiday, but watch out for 2020 Q2 earnings season: the good, the bad and the ugly ANALYSIS-Make or break: second-quarter results will test Europe's confidence Europe Inc may avoid Q2 corporate recession - Refinitiv data (Josephine Mason) ***** $1 TRILLION DISAPPEARS IN THIN AIR (1010 GMT) $1 trillion - that's the value that's been wiped off global equities in the last week as central banks' forward guidance failed to meet investors' expectations, Trump's tweet raised fears of a full-blown trade war, no-deal Brexit worries kept rising and concerns about a possible corporate earnings recession grew. The market cap losses could further rise after factoring in today's losses. European stocks are heading further lower in high volumes (0.6 x 30-day average through in just 3 hours) in what could have very well been a quiet summer Friday, if not for Trump's tariff threat overnight. (Thyagaraju Adinarayan) ***** OPENING SNAPSHOT: SEA OF RED (0732 GMT) European stocks open sharply lower (-1.8%) as Trump's fresh tariffs on $300 billion of Chinese imports from Sept. 1 escalates trade tensions between the world's largest economies. The news is rattling global financial markets with U.S. stocks selling-off 1% overnight. The trade-sensitive DAX and France's CAC 40 are down 2.2% hitting two-month lows. The fresh tariff threat comes a few days after U.S.-China ended their first round of trade talks. No summer lull: In just 25 minutes, a fifth of daily average volumes went through on the DAX. It will be difficult today to read into a stock's performance based on their earnings announcement as almost no sector in Europe is spared from this widespread sell-off (80% of the STOXX 600 companies are down). Chipmakers, cars and miners are the biggest fallers with some of them falling 8%-10%. The basic resources index is now on track for its biggest 2-day fall since the Brexit referendum in June 2016. "Anyone trying to determine the next move in stock markets in the last 24 hours would be justified in feeling like they’ve just experienced a bit of whiplash," Michael Hewson at CMC Markets says. (Thyagaraju Adinarayan) ***** ON OUR RADAR: PLANES, BANKS AND AUTOMOBILES (0623 GMT) In corporate news, it's a mixed bag. British Airways owner IAG has delivered a better-than-expected profit for the first half of its key summer period on strong ticket sales and said it was on course to match last year's profit for the full year. Royal Bank of Scotland has announced a 1.7 billion pound ($2.1 billion) dividend, the second UK bank this week to return cash to shareholders following Barclays' hike to its payout, and posted better-than-expected H1 profits. But the bank warned a tough economic environment will curtail its profitability over the next 18 months. German insurer Allianz posted a better-than-expected 13.5% rise in net profit in the second quarter from a year earlier and confirmed its full-year profit target. In France, Credit Agricole, the nation's second-largest bank in terms of market capitalisation, said a weak performance at its corporate and investment unit weighed on its profits during the second quarter while Natixis saw its net profit during the second quarter fall almost a third to 346 million euros. There's more bad news in autos - Italian tyremaker Pirelli has cut its revenue guidance for the second time this year, joining a string of suppliers hit by a broader auto industry downturn during the last quarter. Here are some early headlines: BA-owner IAG Q2 profit ahead on strong revenue Mediaset open to being minority shareholder in MFE alliance in future - CEO to paper Enel sticks to guidance after H1 earnings jump on renewables, networks Pirelli cuts revenue guidance for second time this year Brazil helps Telecom Italia to meet expectations Allianz Q2 profit up 13.5%, better than expected; confirms 2019 target Credit Agricole's corporate and investment banking unit weigh on profitability Vonovia confirms profit guidance after H1 profit gain Autogrill sticks to 2019 target on cash flow Lanxess Q2 touch better-than-expected, sticks to outlook despite weaker economy Mediaset's Italy ad sales fall after losing soccer rights French bank Natixis says inflows into H2O normalized in July after massive withdrawals (Josephine Mason) ***** EUROPE STOCK FUTURES REELING (0614 GMT) As expected, Trump's escalation of the U.S.-China trade dispute overnight has European stocks reeling. The Eurostoxx futures are down 1.9% at their lowest since June 18 and German futures have fallen 1.7% to their weakest since June 6. (Josephine Mason) **** SUMMER LULL? WHAT SUMMER LULL? (0527 GMT) With the U.S., Japanese and European central banks' policy meetings and the latest round of trade talks between Washington and Beijing out the way without much ado, many investors expected a quiet August. Many are already at the beach. But U.S. President Trump's shock decision last night to slap a 10% tariff on the remaining $300 billion of Chinese imports from next month has derailed any hopes of a summer lull in trading. Markets overnight have taken a beating. Investors have raced for the exits from riskier assets like equities and piled into gold and other safe havens and in Europe the news is likely to inflict the most pain on trade-sensitive indices like Germany's DAX and tech and autos. IG financial spreadbetters expect Frankfurt's DAX to fall 238 points, or almost 2%, to 12,015 at the open, which would be its lowest since June 18. They're also calling London's FTSE to open 82 points lower at 7,503 and Paris' CAC to open 106 points lower at 5,452. Markets on this side of the pond have had a tough week already as investors worry about the potential damage to the euro-zone economy and beyond from a no-deal Brexit. The euro-zone STOXXE benchmark is on track for its worst weekly performance since late May. (Josephine Mason) ***** (Reporting by Danilo Masoni, Josephine Mason and Thyagaraju Adinarayan)