LIVE MARKETS-Auto warnings?

* STOXX up 0.1%, DAX down 0.1% as trade tension puts brakes on rally * Dialight drops 31%, Funding Circle falls 20% * Galapagos climbs 6% after filgotinib drug announcement * U.S. threatens tariffs on $4 billion of additional EU goods July 2 - Welcome to the home for real-time coverage of European equity markets brought to you by Reuters stocks reporters and anchored today by Helen Reid. Reach her on Messenger to share your thoughts on market moves: helen.reid.thomsonreuters.com@reuters.net AUTO WARNINGS? (0824 GMT) It's a quiet session in Europe this morning in terms of price moves, so let's turn the focus to the upcoming earnings season and the export-oriented auto industry, where it seems investors have positioned themselves for possible profit warnings. Europe's autos sector index has fallen to trade at its lowest level in more than 6 years relative to the broader market, even though it is up 11% so far in 2019. Jefferies analysts say profit warnings seem widely expected after a weak Q1, but nevertheless the second-quarter results may be more nuanced. "Shares are largely anticipating profit warnings. However, we expect most OEMs will continue to argue better H2 conditions to justify current targets, particularly easing raw materials and FX, more stable production schedules post China de-stock and easier comps," they say. In more detail on single stocks, they add: "More than FCA, Renault may need positive corporate news flow to offset profit weakness. Risk to GM guidance supports more Ford outperformance. VW, PSA, and BMW look safe, with the first two not reliant on a strong H2. CF [cash flow] could disappoint at Daimler and VW." Results from Daimler, Peugeot and Ford in the U.S. are due on July 24, VW on July 25, Renault on July 26 and Fiat Chrysler on July 31, while both BMW and GM report on Aug 1. (Danilo Masoni) ***** OPENING SNAPSHOT: FALTERING STOCKS AND SOME SHARP DROPS (0723 GMT) No surprises that enthusiasm among European investors is drying up somewhat today, with the trade-sensitive DAX barely managing to stay in positive territory and the STOXX 600 up just 0.2% after the latest tariff threat from the U.S. in a long-running aircraft subsidy dispute. The reaction in Airbus shares has been pretty muted, with the stock down 1% at the open but now only trading down 0.4%. On the M&A front, Hexpol is up 3.7% as investors welcome its acquisition of U.S. rubber compounder Preferred Compounding. A couple of small-cap UK stocks are having a difficult morning, to put it generously. Dialight is tanking 40% after warning on profit and announcing its CEO will step down, while Funding Circle is down 10.6% after halving its revenue guidance. Among sectors the trade-proxy autos stocks are down 0.3%, while more defensive sectors such as healthcare are taking the lead, helped by a 5% gain in Galapagos shares after the drugmaker announced it would submit its drug filgotinib as a treatment for rheumatoid arthritis to the FDA this year. (Helen Reid) ***** WHAT'S ON THE RADAR: WHISKEY, PLANES, SME LENDING (0652 GMT) A threat from the U.S. to slap tariffs on $4 billion of additional EU goods, the latest move in an ongoing dispute over aircraft subsidies, will douse hopes that the global protectionist tone is softening, but hasn’t been enough to hold European stocks back today, with futures rising 0.2-0.3% across the region. The market reaction to the list of additional products that could be hit with tariffs – including olives, Italian cheese, and Scotch whiskey - will likely be contained and focused on those companies directly concerned. The world's biggest whiskey maker Diageo could fall 1%, traders say, along with France’s Pernod Ricard. Europe's biggest planemaker Airbus could also fall around 1% as the ratcheting up of tensions puts a further strain on ties as the EU and U.S. attempt to negotiate a trade deal. In the UK a couple of profit warnings among small-caps could dent stocks. Funding Circle shares are seen falling 10-15% after the small and medium-sized enterprise lending platform provider halved its 2019 revenue guidance, blaming reduced demand for loans in an “uncertain” economic environment. LED components maker Dialight is seen dropping 25-30% after it announced its CEO is stepping down, and warned on profit. (Helen Reid) ***** FUTURES EDGE UP AS RALLY LOSES SOME STEAM (0631 GMT) European stock futures are up 0.2-0.3% in early trading. It'll be a surprise to no-one that yesterday's strong rally is losing steam as optimism over U.S.-China trade gives way to new angst about the U.S. ramping up threats against European products. The extension of a U.S. tariff threat to products including olives, pasta, meat, cherries, and some types of whiskey is expected to hurt specific parts of the market. In particular, traders say Pernod Ricard and Diageo are seen falling 1% each after the threat which could hurt their whiskey brands. Pernod Ricard owns Jameson Irish whiskey, and Diageo is the world's biggest whiskey producer. "Both have been moonbound this year too," a trader points out. Airbus could also take a hit after the further tariff threats which are the latest move in a long-running dispute over aircraft subsidies. In other news, Deutsche Bank has discussed lowering its capital buffer with regulators, Bloomberg reported, citing sources. Here are a few more headlines: Fastjet CEO Nico Bezuidenhout to step down Plus500 revenue rises after dismal prior quarter Funding Circle halves revenue guidance for 2019 on reduced demand UK house prices rise weakly as Brexit weighs - Nationwide (Helen Reid) ***** OLIVES, WHISKEY, AND BUDGET DEFICIT TARGETS (0548 GMT) The threat of U.S. tariffs on European goods pours cold water on any budding hopes of a step back from protectionist rhetoric, and speaks to what some in the market believe: that even if trade relations between the U.S. and China cool, that could simply mean Trump's ire shifts towards Europe instead. The list of additional products that could be hit with tariffs includes olives, Italian cheese and Scotch whiskey. Speaking of Italy, a government source told Reuters last night after a cabinet meeting that the country's 2020 budget deficit target has been confirmed at 2.1% of gross domestic product - down from a previous goal of 2.4% - which could be good news for Italian assets hit by investor jitters as the European Commission threatens to launch disciplinary action against Rome. Here's your early sweep of headlines: WPP in exclusive talks to sell Kantar stake to Bain Capital British manager Woodford's flagship fund to remain suspended Italy confirms 2020 deficit target at 2.1% of GDP - govt source London Metal Exchange brands must show impact on environment - NGOs AB InBev Asia business launches up to $9.8 bln Hong Kong IPO - term sheet Banks readying 2.5 bln euro loan in TIM-Vodafone Italy tower deal - sources Europe's 5G delayed by trade war and security reviews, says Tele2 CEO (Helen Reid) ***** EUROPE SET FOR FURTHER GAINS, BUT NEW U.S. TARIFF THREAT COULD HURT (0530 GMT) European stocks are expected to extend their rally this morning after the Euro STOXX 50 hit a one-year high yesterday, but the party could be spoiled by the U.S. threatening tariffs on $4 billion of additional EU goods - the latest blow in a long-running dispute over aircraft subsidies. Asian shares wobbled, U.S. Treasury yields fell and gold rose as weak global manufacturing activity reinforced worries about slowing growth while uncertainties over the prospect of a Sino-U.S. trade deal also hurt sentiment. Financial spreadbetters expect London's FTSE to open 24 points higher at 7,521, Frankfurt's DAX to open 29 points higher at 12,551, and Paris' CAC to open 16 points higher at 5,584. (Helen Reid) ***** (Reporting by Helen Reid, Danilo Masoni, Josephine Mason and Thyagaraju Adinarayan)