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LIVE MARKETS-Bad news is bad news

* European shares open higher; STOXX 600 +0.9% * Earnings in focus: SBM, Vifor, Hargreaves up after results * Top Osram shareholder rejects takeover offer, shares fall * Yuan firms as China signals intent to stabilise decline 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: rm://danilo.masoni.thomsonreuters.com@reuters.net BAD NEWS IS BAD NEWS (1026 GMT) So far this year stocks have enjoyed a rally whenever sovereign bond yields slide on the 'bad news is good news' factor. And the rally got cut-off after the Fed was less dovish than expected. Pointing to this trend, Morgan Stanley cross-asset strategists say markets have grown too comfortable with the notion of weaker growth brings easier policy. "While there were instances where equity-rates correlations were positive, we'd note that they have largely been negative (i.e., lower yields, lower stocks)." The bank says negative correlation is justified as lower real yields are often a reflection of weaker growth, which typically goes hand-in-hand with a poorer outlook for earnings and stocks. Morgan Stanley says returns on equities are best when both real yields and inflation expectations are rising, worst when they both fall. And, when both are falling, defensive sectors like staples, healthcare and utilities outperform the market, Morgan Stanley strategists say. (Thyagaraju Adinarayan) ***** "EUROPEAN EQUITIES - DOWN, NOT OUT" (0838 GMT) European stocks are rising this morning, finally there are some signs of stabilisation in the market after a massive sell-off on escalating trade tensions. "European equities are particularly sensitive to trade growth, and we think they are likely to be more affected than S&P 500 companies if trade tensions escalate further," Goldman Sachs says in a note titled "Europe equities - Down, not out". Mining names were the worst hit by the recent trade storm, slumping 13% in 5 days. Goldman Sachs downgrades trade-sensitive sectors autos (to underweight) and basic resources (to neutral). The bank remains bullish on personal & household goods, healthcare and technology sectors. Trade aside, Goldman Sachs believes earnings growth expectations for the region is "too high" at +6% for 2019 and +11% for 2020. It expects a 2% growth for both years, saying: "This slow but positive pace of growth reflects a weak economic cycle, low inflation and a lack of growth from structurally impaired areas of the market (such as Banks, Autos and Telecoms)." There has been relentless cuts to earnings estimates since late last year, one of the worst stretches since 2016: (Thyagaraju Adinarayan) ***** OPENING SNAPSHOT: BROAD-BASED REBOUND (0724 GMT)9 Easing worries over FX wars and strong export data from China gave a boost to Asian shares and the good mood is spreading to Europe where we're seeing a broad-based bounce that's lifting the STOXX 600 regional benchmark up 0.7% in early deals. No sector is trading in the red with more than 91% of shares on the STOXX are in positive territory. Easing concerns over an escalation in trade tensions is lifting the trade-sensitive tech and basic resources indexes, while also helping offset fresh political noise from Italy - Italian banks are up 0.6%. Here's your opening snapshot: Turning to single stocks, earnings & M&A are causing the biggest moves on the STOXX. SBM Offshore has shot up 7.5% after the provider of floating oil and gas production vessels reported forecast-beating results, leading it to raise it full-year targets, helped by growth at its turnkey operations. German lighting group Osram is leading fallers, down 5%, after its top shareholder rejected a 3.4 billion euro ($3.81 billion) takeover offer from private equity firms Bain and Carlyle. Other top gainers include Vifor Pharma and Hargreaves Lansdown and Zurich Insurance, up 4.7%, 3.9% and 3.5% respectively, after well-received results. (Danilo Masoni) ***** ON OUR RADAR AT THE OPEN (0652 GMT) The bounce in Europe is set to gather steam this morning with futures on main euro-zone benchmarks set for their biggest gain in many weeks, up 1.2-1.3%. A firmer-than-feared yuan fixing in China eased worries over aggressive FX intervention while an unexpected rise in China's exports in July also helped the Chinese currency stabilise, lifting equity markets in Asia, while on Wall Street overnight the S&P 500 recovered for steep losses and U.S. futures this morning were heading north. In European corporate news, there are lots of earning to digest as well as some fresh deal making activity. Thyssenkrupp scrapped its outlook for the current business year due to falling demand in the automotive and steel industries, making it the fourth profit warning under current boss Guido Kerkhoff. The warning was expected and its shares, which hit a 16-year low earlier this week, are up 2.8% in early trade, with one trader saying quarterly sales were better than expected. German sportswear company Adidas reported disappointing Q2 sales, sending its shares down 4.8% in early trade, but confirmed it expects a recovery in H2 after it stemmed a decline in Europe and saw its long-struggling Reebok brand recover. In dealmaking, German lighting group Osram is down 3.7% in early trade after its biggest shareholder, Allianz Global Investors, rejected a 3.4 billion euro takeover offer from private equity firms Bain and Carlyle. Other results on the radar include those from Merck KGaA which posted a gain in quarterly earnings that was slightly higher than expected (shares up slightly in premarket), while Zurich Insurance said it was set to beat its targets amid aggressive cost-cutting, sending its shares up 3.2% in premarket trade. Disappointing results are expected to weigh heavily on shares in Italian shoemaker Tod's - they could fall as much as 1-%. Adecco revenues fell 3% in Q2 as the staffing company said hiring slowed in Europe's automotive and manufacturing sector. Results fell short of analyst expectations but nevertheless its shares are seen rising. Other stock movers: Raiffeisen Bank International's Q2 net profit beats estimates ; Italy set to give ArcelorMittal guarantees to avoid Ilva shutdown -source UK headlines Aviva reviews Asia business, H1 operating profit rises 1% Hastings posts steep drop in first-half profit Trade war, Brexit hit Savills half-year profit Housebuilder Bellway forecasts higher annual housing revenue Hargreaves Lansdown full-year assets boosted by net inflows (Danilo Masoni) ***** EARNINGS IN FOCUS: DT, THYSSENKRUPP, ADECCO, MERCK (0559 GMT) Turning to the corporate front there are more updates for investors to digest this morning with Deutsche Telekom confirming its guidance for the year as Europe's largest telco by revenues pushes to complete the $26 bln takeover of competitor Sprint. Thyssenkrupp scrapped its outlook for the current business year due to falling demand in the automotive and steel industries, making it the fourth profit warning under current boss Guido Kerkhoff, while Adecco revenues fell 3% in Q2 as the staffing company said hiring slowed in Europe's automotive and manufacturing sector. Other results on the radar include those from Merck KGaA which posted a gain in quarterly earnings that was slightly higher than expected, while Zurich Insurance said it was set to beat its targets amid aggressive cost-cutting. In M&A, eyes on Siemens Healthineers on news it is buying Corindus Vascular Robotics of the U.S. for $1.1 billion. Here are other market moving headlines: Aurubis Q3 earnings slump 72% on poor markets, project problems Debenhams to name Stefaan Vansteenkiste as CEO -source British Airways resuming services after latest IT meltdown Air France KLM's July passenger numbers rise 1.8% y/y Angry Birds maker Rovio's Q2 profit falls on Hatch expansion costs Bayer, Elanco aiming to reach animal-health deal next week - Bloomberg Tod's family owner to keep investing despite sliding sales BHP Group to invest $283 mln in Trinidad and Tobago petroleum project Novartis says it knew of Zolgensma data problems before U.S. approval EU opens antitrust investigation into PKN's bid for Lotos Ryanair's UK pilots vote to strike later this month Spanish court summons DIA owner Fridman in Zed bankruptcy inquiry Italy's BPER profit falls on loan losses, softer revenues Massimo Zanetti cautious on 2019 after fall in H1 coffee sales . (Danilo Masoni) ***** EUROPE REBOUND SET TO CONTINUE AS YUAN FIXING CALMS NERVES (0530 GMT) European shares are expected to open higher this morning following gains in Asia where investors took comfort after China fixed the yuan at a firmer level than many had feared, signalling unwillingness to engage in heavy currency depreciation. "The Fix is the number one game in town and will continue to dictate the pace of play for risk assets over the near term," says Stephen Innes, managing partner at VM Markets Pte. Spreadbetters at IG expect London's FTSE to open 21 points higher at 7,220, Frankfurt's DAX to open 85 points higher at 11,735, and Paris' CAC to open 49 points higher at 5,316. In the previous session the STOXX 600 broke a three day losing streak, ending up 0.2%. Here's more on the yuan: Yuan firms as PBOC signals intent to stabilise decline (Danilo Masoni) ***** ($1 = 0.8915 euros) (Reporting by Danilo Masoni, Josephine Mason and Thyagaraju Adinarayan)