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LIVE MARKETS-Big equity rally from here if history repeats

* European stocks flat * FTSE buoyed by sterling weakness, AstraZeneca * BHP slides 1.8%, Pandora jumps 10% after results * Elanco Animal Health to buy Bayer's animal health unit for $7.6 bln * 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 BIG EQUITY RALLY FROM HERE IF HISTORY REPEATS (1135 GMT) If history is any indication, we could see a whopping 20% rally on European equities in the next 12 months. The U.S. 10-year treasury bond yields dipped below 1.6% two weeks ago for the first time in years and has remained under the level since. It's only done that twice before - in mid-2012 and mid-2016 - and in both instances the German and French blue chips staged a massive rally (>30% on average) the year after, boosting the European benchmark STOXX 600 index. (see chart below) "At these levels, European & U.S. equities have experienced a 100% win ratio in the following 12 months," Citi equity strategists say. "Either it's different this time, and U.S./global recession is approaching, or investors should buy equities again." Yesterday JPMorgan said it expects markets to hit fresh all-time highs in the first half of next year before a recession hits. (Thyagaraju Adinarayan) ***** AUGUST WOES DEEPEN (1036 GMT) August is typically one of the weakest in the calendar year, but this year's peak summer month is shaping up to be worse than usual in Europe. The pan European STOXX 600 index is down 3.4% for month so far, lagging the 10-year average. The chart below shows that most of the damage was done in the first few days of the month after U.S. President Trump threatened a fresh round of tariffs on Chinese imports (only backtrack last week). Among the individual moves, trade-sensitive and cyclical stocks - miners and car makers - have borne the brunt of the selling, as well as banks, which have been hammered by expectations of lower for longer interest rates and worries about a U.S. recession. And there are only a few winners - utilities, healthcare and food & beverage are the only sectors in positive territory, highlighting the shift towards bond proxies and safe havens. (Josephine Mason) ***** WATCH OUT FOR 2020 EARNINGS DOWNGRADES (0955 GMT) With the second-quarter earnings nearly over and confirming an earnings contraction for the second straight quarter, consensus of a 10% growth in 2020 seems to be ambitious. UBS equity strategists recently reduced their 2020 earnings growth expectations sharply below consensus to -2% in a top-down model, basing it on their reduced GDP estimates. They expect Europe Inc to return to modest growth in 2021, suggesting we won't see a multi-year earnings recession. The sharp cut in 2020 estimates follows a warning last month by SocGen's Alain Bokobza, who said, the consensus is "too optimistic", highlighting some risks of downgrades. "The moment consensus begins to downgrade 2020 EPS figures will signal caution for us, as this was the case back in September 2018," he warned. UBS's Nick Nelson and team offer a typical disclaimer offered by most other research houses: "The outlook around the trade wars is changing day by day (if not hour by hour and tweet by tweet) and therefore the outlook for the macro variables, earnings and hence the index is extremely fluid." 2020 earnings growth consensus chart: (Thyagaraju Adinarayan) ***** OPENING SNAPSHOT: EUROPE FLAT TO SLIGHTLY HIGHER (0725 GMT) European stocks are flat to slightly higher in early deals, just about extending their winning streak to a third day as the mood across riskier assets remains positive with defensive and rate-sensitive stocks leading the charge higher. Real estate, food and beverage and healthcare are the top performing sectors, lifting the pan European STOXX 600 up 0.1%. Stocks may be vulnerable to profit taking though after the decent run higher over the past two days amid hopes of stimulus from China and Germany. BHP is under pressure, down 2.1% after hitting its lowest in three months and at the bottom of the London's blue chips after delivering weaker-than-expected results. Danish jewellery company Pandora is putting in a surprisingly strong show, up 7.7% even after delivering disappointing results. Greene King shares are down slightly after surging 50% after it became the latest pub operator to be bought by a foreign suitor. (Josephine Mason) ***** ON OUR RADAR: BEERS, WATCHES AND SUPERMARKETS (0656 GMT) The mood across riskier assets like equities improved markedly in recent days amid hopes of stimulus in Germany and China which have soothed worries about a global economic slowdown that rattled markets last week. But stock futures have reversed their early gains and are now broadly lower with the expectation of FTSE which are up 0.2%. A spot of profit taking was inevitable after the benchmark STOXX 600 rose 2.5% over the past two sessions, its strongest two-day winning streak since early January and recouping all the ground lost last week. In corporate news, dealmaking is brewing in the UK pub industry, with Hong Kong's richest man snapping up Greene King, the latest sign that the cheap sterling is attracting foreign suitors even as Brexit turmoil deepens. Royal London Asset Management, which owns as 2.79% stake in Greene King, says the deal shows that UK assets as not a "no-go zone" for overseas companies. The deal worth $5.6 billion to buy the brewer of Old Speckled Hen and Abbot Ale may add further fizz to UK pub and restaurant stocks, which have been hurt by concerns about damage to consumers' spending power with the uncertainty over the exit from the UK. Greene King shares surged 50% yesterday afternoon on the news. Osram Licht shares are higher in early deals after a report that Bain Capital and Carlyle are considering sweetening their bid for the German lighting company, trumping a deal from AMS and potentially triggering a takeover battle. French supermarket retailer Casino is targeting a further 2 billion euros ($2.2 billion) of asset sales, stepping up plans to cut debt and improve financial performance. Its shares are seen rising 2-3% on the news. Swiss watch makers Swatch and Richemont may get a lift from data showing Swiss watch exports rose in July, reinforcing hopes that demand for luxury goods from Asia, and in particular China and Hong Kong, remains resilient despite the trade war and violent protests in the former British colony. Danish jewellery maker Pandora posted a 13.7% fall in second-quarter core profit, missing expectations, but it has maintained its full-year guidance. Its shares are seen falling 3%. In other earnings, BHP shares have been under pressure in Australia overnight and are expected to fall 1% in London after the miner delivered lower than expected profits and dividend even though it included a record payout and its largest annual profit in five years. The company also flagged global economic headwinds which would hit demand for its key commodities, iron ore and copper. Goldman has upgraded Antofagasta and Glencore to 'neutral' from 'sell'. Oslo-listed fish farmer Bakkafrost reported a smaller-than-expected drop in Q2 core profit amid lower salmon output and a decline in prices and its shares are seen up as much as 4%. Here are your headlines: Mining giant BHP pays record dividend, but flags global growth headwinds Bakkafrost Q2 core profit drops 17%, but beats forecast UK pubs operator Greene King agrees to 4.6 bln pounds Hong Kong offer French retailer Casino targets further 2 bln euros of asset sales Retailer Casino raises offer to buy Exito's 50% stake in GPA Germany's IG Metall union rejects AMS takeover offer for Osram Persimmon profit drops as focus on quality leads to delivery delays AstraZeneca's Farxiga meets main goal of heart failure study (Josephine Mason) ***** EUROPE SEEN TAKING A BREATHER (0513 GMT) Stocks in Europe are expected to take a breather this morning after gaining 2.5% and recouping all of last week's losses over the past two trading sessions as worries about a global economic slowdown have eased. MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.31%, while Japan's Nikkei rose 0.45%. The improved mood was helped by a rally on Wall Street overnight, with the S&P 500 gaining 1.21%. Financial spreadbetters expect London's FTSE to open 3 points lower at 7,187, Frankfurt's DAX to open 3 points lower at 11,712, and Paris' CAC to open 6 points lower at 5,365. (Josephine Mason) ***** (Reporting by Danilo Masoni, Josephine Mason and Thyagaraju Adinarayan)