LIVE MARKETS-Autonomous driving: don't hold your breath

* European shares return into positive territory

* Banks boosted by report ECB studying tiered deposit rate

* Autos rise on dealmaking speculation

* Renault eyes Fiat bid after Nissan merger - FT

* Sports Direct proposes offer for Debenhams

* Defensives under pressure

March 27 - Welcome to the home for real-time coverage of European equity markets brought to

you by Reuters stocks reporters and anchored today by Danilo Masoni. Reach him on Messenger to

share your thoughts on market moves: danilo.masoni.thomsonreuters.com@reuters.net

AUTONOMOUS DRIVING: DON'T HOLD YOUR BREATH (1238 GMT)

Another building hype - around driverless cars - is also likely to be premature, with many

hoops still to be jumped through before the technology reaches the mass market.

"There seems to be a widening realisation that the appearance of driverless cars (level 3

and above) is likely to be significantly delayed," write Kepler Cheuvreux's Alexandre Raverdy

and team.

The initial euphoria around autonomy is starting to fade, they reckon, with predicted

adoption pushed further out.

"Worse, fully autonomous cars may never move into the mainstream as regulation, consumer

acceptance, and affordability are key barriers that are likely to remain difficult to overcome,"

they add.

Kepler's forecasts suggest 5 percent penetration of fully autonomous cars (level 4-5) by

2030, largely through robo-taxi fleets. You can see an explanation of the levels of autonomy

here https://bit.ly/2HtbzyL.

Furthermore, they warn, "we may never see retail driverless cars on the road".

Suppliers to the biggest passenger carmakers are the most sensitive to this hype, hence

SocGen's preferred way to get exposure to the sector is through tyres (Michelin and

Nokian) and companies least exposed to the light vehicle cycle (CNH for its

exposure to agricultural vehicles, and Rheinmetall for defense).

(Helen Reid)

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SHOULD YOU BELIEVE THE RECESSION HYPE? (1152 GMT)

"The 'recession hype' took us on a rollercoaster of emotions last Friday," writes Societe

Generale's head of global asset allocation and equity strategy Alain Bokobza.

As today's moves are showing, the recession obsession isn't going away anytime soon. But it

may be just that - hype - without much bearing on economic realities facing investors in the

U.S. or globally.

There's no denying the likelihood of a U.S. recession is increasing, and has probably risen

more as Trump's late-cycle fiscal boost runs out of steam, says Bokobza.

But "near term, we take the view that it is too early to be overly defensive".

Despite investors growing increasingly bearish on earnings (see below), Bokobza and his team

reckon there won't be any major blips in the first half, but the second half could prove more

tricky.

"We would turn more cautious in the second half when profit margins will likely start being

squeezed by companies' inability to pass cost pressures on to consumers, with a potential ripple

effect on share buybacks," they write.

Societe Generale recommends being long EM equities versus the S&P 500, as well as long

Nasdaq 100 versus Russell 2000 to take advantage of a slowdown in the U.S. economy as the fiscal

boost fades while China ramps up stimulus.

(Helen Reid)

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STOCKS SURRENDER AS YIELDS CAUSE CONSTERNATION (1034 GMT)

European stocks have taken a turn for the worse, with the STOXX now down 0.3 percent along

with the major euro zone indices and the FTSE 100. Banks also gave back most of their gains.

The culprit for this sudden slide? 10-year Bund yields, traders say, which slipped under the

-6 basis point level for the first time since October 2016. The inversion between U.S.5-year and

2-year Treasuries has also deepened to 5 basis points while the 3-month/10-year spread is its

lowest since Feb 2007, and U.S. futures have been dragged down into negative territory.

"For the last week the equity/yield relationship has been positive... Now that's reversing,"

writes a trader.

"The inversion of part of the US yield curve continues to cause consternation among

investors," writes Marc Chandler, chief market strategist at Bannockburn Global Forex, adding

however that it is "partial and shallow" and, given many economists already expect a recession

in 2020 or 2021, the inversion merely reinforces what many already anticipated.

Paul O'Connor, head of the UK-based multi-asset team at Janus Henderson, is also sceptical:

"My instinct is the fear about yield curve inversion has been somewhat overplayed," he tells us.

"Macro momentum has been spluttering for some time, I don't think there's anything the bond

market knows about the global economy that the rest of us don't know."

(Helen Reid)

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THE RETURN OF "SUPER MARIO"? (1011 GMT)

Euro-zone banking stocks were on track to break their five-day losing streak today, gaining

as much as 1.2 percent and outpacing the broader markets, after comments from ECB chief Mario

Draghi inspired renewed confidence in the battered sector.

The gains were pretty short-lived, though, as the sector has fallen back to flat as

markets take a turn for the worse.

Speaking at a conference in Frankfurt, Draghi said the central bank may need to mitigate the

side effects of sub-zero rates, a comment which has been interpreted as a sign that the bank may

orchestrate a tiered depo facility.

That would be helpful to banks because it would reduce the cost for them to deposit excess

liquidity at the ECB and boost net interest income. Bigger banks with more surplus - i.e.

northern European ones - would likely benefit the most, traders say.

"It's a hint to the possibility of (depo rate) tiering. That would ease pressure on banks,"

says JCI fund manager Alessandro Balsotti.

It would offer some respite to the banking sector, which is on track for a 5.5 percent drop

this month, its worst since December, after the ECB reversed course earlier this month and

delayed raising interest rates until at least next year as the region's economic outlook gets

bleaker.

It would also help offset disappointment over the less generous terms of the central bank's

plans to issue more cheap loans to banks as part of its latest effort to boost lending and

flagging growth in the region.

Benjie Creelan-Sandford, banks analyst at Jefferies, agrees the comments about offering some

respite to negative interest rates are boosting the sector this morning.

"He's certainly not promising anything but opening the door to reviewing different options –

e.g. some form of deposit rate tiering could yet be on the table," he says.

Banks aren't out of the woods yet - in his speech today, Draghi warned the bank may even

postpone rate hikes further.

But for now, investors are hoping for the return of "Super Mario" whose pledge to save the

euro in 2012 won the confidence of financial markets and arrested the bloc's debt crisis.

(Danilo Masoni, Helen Reid and Josephine Mason)

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AUTOS & BANKS SNAP LOSING STREAK, DEFENSIVES DIP, DEBENHAMS ROCKETS (0837 GMT)

European shares have opened up slightly but there is little conviction around as worrying

signals from the bond market over the outlook for the US economy and Brexit uncertainty continue

to linger in the background, keeping investors on the edge.

The STOXX 600 is trading just flat.

"For now, the extreme nervousness that the inverted yield curve brought has died down, but

it has by no means disappeared," says London Capital Group head of research Jasper Lawler. "Weak

data is hard to ignore, and this is being weighed up against a more accommodative approach from

central banks".

Perhaps reflecting the less anxious mood is the fact that banks - which had been

particularly hit by the bond market dynamics and worries over slowing growth - are up following

five consecutive session of losses.

Autos, another cyclical play and which is highly exposed to the U.S., are also

rising after five days of weakness with M&A chatter coming to the rescue and making the index

the top sectoral gainer in Europe, up 1 percent.

Fiat Chrysler shares are up more than 3 percent and the second-biggest gainer on

the STOXX after the FT report Renault is eyeing a Fiat Chrysler bid after a Nissan

merger.

Defensives meanwhile are showing a bit of fatigue after rallying in the last few days:

utilities, food & beverage and healthcare are the top fallers.

The outstanding mover today is Debenhams, up more than 60 percent after Mike

Ashley's Sports Direct said it is considering an offer for the ailing department store

group.

Here's Debenhams and below your opening snapshot which is showing a rather mixed picture.

(Danilo Masoni)

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WHAT YOU NEED TO KNOW BEFORE EUROPE OPENS (0755 GMT)

European shares are expected to open up slightly but stay below the five-month peak hit last

week as worries over a possible US recession and Brexit uncertainty ahead of today's UK

parliament votes keep investors side-lined after a strong start of the year. Futures on main

country benchmarks are up 0.2-0.3 percent.

On the corporate front, deal-making speculation could animate the auto sector after five

straight session of losses with the Financial Times reporting that Renault intends to restart

merger talks with Nissan and then set sight on a bid for Fiat Chrysler. Renault shares

were indicated up 2 percent, while Fiat could rally as much as 5 percent. Daimler

shares will also be eyed after the same newspaper said it is close to selling half of

its Smart unit to China's Geely.

In the healthcare sector, recently supported by investors seeking refuge into defensive

plays amid the worrying economic signals, Novartis was up 2 percent in premarket trade

after winning FDA approval for its $88,000-per-year Mayzent multiple sclerosis drug.

In earnings, Imperial Brands was up 2 percent in premarket after saying full-year

net revenue growth will be at or above the upper-end of its 1-4 percent range. Meanwhile,

unlisted Lloyd's of London recorded a loss of 1 billion pounds due to major natural

catastrophes.

Still in M&A, Sports Direct, the British sportswear firm controlled by Mike Ashley,

has proposed a 61.4 mln stg possible offer for Debenhams, sending shares in the ailing

department store group up 100 percent in pre-market. The possible offer would be 5 pence a share

in cash vs Debenhams' closing price yesterday of 2.2.

For other headlines check out the previous post.

(Danilo Masoni)

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FUTURES INCH UP, AUTO-SECTOR DEALMAKING IN FOCUS (0704 GMT)

European stock futures have opened up slightly, confirming earlier indications from

spreadbetters, while on the corporate front dealmaking activity in the auto sector will take

centre stage. The Financial Times reported that Renault intends to restart merger

talks with Nissan within 12 months and then set sight on a bid to buy Fiat Chrysler

. The FT also reported that Daimler is close to selling half of its Smart

unit to China's Geely.

Here's your futures snapshot and below your headlines roundup:

Renault eyes Fiat Chrysler bid after Nissan merger - FT

Daimler nears deal to sell half its Smart unit to China's Geely -FT

German finance minister says he's not pressuring Deutsche and Commerzbank to merge

Novartis gets U.S. approval for new drug to treat multiple sclerosis

Swiss drugmaker Roche says to shutter Rio de Janeiro plant

Ten more Brazilian states' soy growers join Bayer patent dispute

Lufthansa plans to buy either Boeing 737 MAX or Airbus A320neo

Amazon, Volkswagen agree strategic partnership for "industry cloud" - report

Electrolux looks to U.S. to boost professional products sales

Telenor bags $213 mln as Veon exit continues

Orpea reported on an EBITDA for FY up at 604 million euros

Carige closes 69 mln euro sale of Creditis unit to Chenavari

(Danilo Masoni)

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EUROPE SEEN STEADYING AT THE OPEN (0620 GMT)

European shares are expected to open flat to slightly higher today as uncertainty over the

Brexit process continues to keep investors sidelined and following an uncertain session in Asia

on worries over a possible economic recession in the United States.

Yesterday gains in defensive sectors and indications that UK PM Theresa May's deal to exit

the European Union could gain some support helped the pan-European STOXX 600 index rise

0.8 percent to snap a four-day losing streak.

Financial spreadbetters at IG expect London's FTSE to open 13 points higher at

7,209, Frankfurt's DAX to open 17 points higher at 11,437 and Paris' CAC to

open 4 points lower at 5,304.

Over in Asia, MSCI's broadest index of Asia-Pacific shares outside Japan was

last up slightly, having dipped earlier into the red as investors try to come to terms with a

sharp shift in U.S. bond markets and the implications for the world's top economy.

For a Brexit recap, read our latest update from London yesterday: UK's weakened PM May still

hoping to push her Brexit deal through.

(Danilo Masoni)

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