UK Markets close in 5 hrs 30 mins

LIVE MARKETS-Brexit: Are you prepared for the wild ride?

* European stocks down slighly but off lows; Italy outperforms * Report ECB considering revamp of inflation goals boosts stocks but results still weigh * Wall Street dips as trade worries, Netflix weigh * Weak Japan export data, report of stalled Huawei progress and weak earnings dent sentiment * SAP sinks after below-consensus results, drags software stocks with it * Novartis hits record high 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: rm://josephine.mason.thomsonreuters.com@reuters.net BREXIT: ARE YOU PREPARED FOR THE WILD RIDE? (1456 GMT) June 24, 2016, a day after people in the UK voted to leave the European Union, UK blue-chip index FTSE 100 fell as much as 7.5% -- the biggest intraday drop since the 2008 financial crisis. On the same day, sterling fell as much as 10% -- biggest one-day fall on record. See it, to believe it: With a no-deal Brexit on the cards, although not the base case for many banks, markets seem to be on the edge already and we may not see as big a damage we had seen right after the referendum. Sterling for instance has taken a beating well-ahead of the outcome. "Yes of course, there's more awareness that it could happen and therefore there has been preparedness put in place," says John Wraith, Head of UK Rates Strategy at UBS. But it's not about the D-day alone, Wraith says "what's not reassuring is, of course, none of us know exactly what form it would take, how bad it would be, what would change and how long would it go on for?" The shocks that unfold after the exit seems to be a concern across markets and UBS Economist Dean Turner goes on to advice to to keep playing small positions. UK recession is an obvious risk to consider. "Don't try and trade the unknowable, quite frankly nobody has an edge on this. Even Boris Johnson," Turner says. (Thyagaraju Adinarayan) ***** EUROPEAN BANKS: WILL THEY EVER OUTPERFORM U.S. PEERS? (1317 GMT) After big banks in the U.S. came out with their numbers, which have mostly surprised to the upside, the focus now shifts to European banks, who have consistently been a laggard on earnings, share moves and market share post the financial crisis. "Many investors simply believe the sector is not investible anymore and see it as a value trap," Barclays writes in a note. Interest rates have been a major headache for European banks hitting their topline, and with central banks turning more dovish during the second quarter, Bank of America Merrill Lynch analysts have decided to cut earnings expectations for some banks. With UBS set to kick off European bank earnings on July 23, the region's investment banks are again expected to underperform their U.S. peers for the 17th straight quarter, they say. BAML prefers Swiss banks UBS and Credit Suisse in Europe and expects Credit Suisse to report a solid quarter driven by their wealth management division. "We see the private banking (wealth management) businesses continuing to perform reasonably well, with AuM levels and inflows decent," say BAML analysts on Credit Suisse. But it says European IBs in general look set to lose further market share in IB revenues to their U.S. peers. For UBS, they expect a beat but say a flatter curve means we may already observe some pressure on their net interest income in Q2. And on Deutsche Bank, which is coming fresh-off its multi-billion dollar restructuring, BAML's focus is on the future performance rather than the current quarter. BAML, which has a "sell" rating on DB, says: "The profitability target is a long way away and in the meantime, our forecasts show revenues, profits, tangible book value and capital all move backwards initially. The key will be in the delivery and proving that this time is different." Barclays also remains sceptical on Deutsche Bank. But it sees value in a number of "national champions", such Lloyds, Caixabank and ABN Amro given their depressed valuations. (Thyagaraju Adinarayan) ***** ECB TO THE RESCUE AGAIN? (1202 GMT) A report that the ECB staff are studying a potential revamp of the bank's near 2% inflation goal, fuelling market speculation of interest rate cuts from the ECB and potentially prolonging any stimulus programme, has provided a temporary distraction from the torrid earnings scene. The euro-zone index hit its highest for the day at 1200 GMT, but didn't quite make it into positive territory, while Italy's index is showing the biggest reaction to the Bloomberg report, now up 0.4%. AFS Group analyst Arne Petimezas in Amsterdam says the pop higher was only brief, suggesting the market may need more convincing news before sustained gains. "The moves weren't that strong, suggesting that the market needs to see more before it's convinced that the ECB is for real," he says. The gains coincided with headlines from Italy's deputy PM Di Maio calling on his far-right League allies to decide if they want to quit the coalition or keep it going, pressuring bond yields. Simmering tensions in the euro zone's No. 3 economy have stirred speculation that Italy may still have a snap election, which could usher in a new more centre-right coalition government. That would temper worries about the country's budget deficit and fiscal policy. Wall Street stock futures are indicating a weak open later, which will likely keep earnings in focus and a lid on the market this side of the pond. (Josephine Mason and Danilo Masoni) ***** WHAT DOES SAP'S DROP SAY ABOUT POSITIONING (1023 GMT) SAP numbers weren't a huge miss but its shares are nevertheless being hit hard this morning, likely illustrating how the bar is quite high for the star performers like the German software giant that have been behind this year's rally. "SAP is a good and well run company, they are making great progress overall, however this is not new meaning high expectations are already priced in," says Markus Huber, trader at City of London Markets. "With the overall environment tough... stocks like SAP sometimes become a bit crowed which also can attract a lot of short term investors who sometimes are jumping on the trade too late and are unwilling to take much risk and time which leads to them being squeezed out during days like today," he adds. Shares in Europe's largest tech company fell 10% at one point this morning, having risen more than 40% so far in 2019. They are now off lows, down 6%. Ericsson - another outperformer this year - followed a similar pattern. Its shares sank 12% yesterday after warning on H2 margins even though its quarterly earnings were in line with expectations and targets were confirmed. JPMorgan called the Ericsson price reaction "disproportional" and said it would buy the stock on weakness. Ericsson is up nearly 3% this morning. (Danilo Masoni) ***** LOOKING FOR BARGAINS WITH GOOD EARNINGS? (0900 GMT) As the earnings seasons gets into gear, UBS strategists have done some number crunching to spot some neglected companies that could offer some upside in their numbers, while star performers get hammered at any first disappointment. They say euro-zone listed domestically exposed firms are trading at a 21% PE discount compared to their international counterparts and could benefit from a better macro. "The domestically focused stocks have recently underperformed internationally exposed stocks and relative valuations are attractive. An improvement in the euro-zone data could provide a support for the domestic valuations to bounce back," they say. They screen out a list of eight names that are cheaper and have positive earnings growth this year and next: Eiffage, Atlantia, Vinci, E.ON, Generali, Enel, Allianz and Klepierre. As you see in this chart, euro-zone macro surprises have indeed been improving over the last six months, outperforming U.S. ones. (Danilo Masoni) ***** OPENING SNAPSHOT: SAP POURS COLD WATER ON EUROPEAN STOCKS (0727 GMT) Investors are shunning equities and other assets considered riskier in times of economic and geopolitical strife this morning as they digest a slew of bad macro and corporate news, sending Europe's benchmark STOXX 600 to its lowest in almost three weeks. It's a sea of red with the exception of the Swiss bourse due to Novartis gains, but Frankfurt is the weakest performer, down 1% as heavyweight SAP sinks. SAP shares dropped as much as 10% in early deals and hit its lowest since April 24, the day activist investor Elliott disclosed a stake in Europe's most valuable tech company, endorsed management strategy and sent shares to record highs. How different it looks this morning. Investors are punishing the German software company for below-consensus quarterly numbers. The news is dragging European IT consultancy shares with it - Capgemini and Dassault are languishing at the bottom of the CAC40, down 2% while Software is down 2.8%. Europe's tech index is getting hammered. Healthcare is the lone gainer, as Novartis rises 1.7% after the Swiss company lifted its full year guidance. (Josephine Mason) ***** TRADE TENSIONS AT CENTRE OF INVESTOR WORRIES (0700 GMT) Weak Japanese export data, disappointing corporate results from U.S. and European heavyweights like SAP and Netflix and a report of stalled progress on Huawei talks are taking their toll this morning, sending European stock futures to their lowest in almost three weeks. Germany equity futures are down as much as 1%, with SAP shares falling almost 7% in early Frankfurt trade after Europe's most valuable tech company's quarterly revenue and adjusted operating profit came in below expectations. It's dragging other software stocks Software with it. Weaker oil prices are likely to pressure London's FTSE. The mood on the market has taken a decisive turn for the worse. Aside from Novartis, which lifted its guidance, investors don't appear to be impressed with earnings this morning, punishing Richemont and Givaudan. A drop in Swiss watch exports is also taking the shine off the luxury sector which has had a stellar run following Burberry and Swatch results earlier this week. Swiss industrial equipment maker Bobst shares are down as much at 9% in early deals after its profit warning, while Swedish car maker Volvo reported better-than-expected quarterly operating profits but launched a cost cutting plan as pricing pressure and the impact of tariffs from the Sino-U.S. trade war dent profitability. That will compound worries about a slowdown in global manufacturing and damage from global trade conflicts, following below-consensus numbers from U.S. rail freight company CSX overnight. Elsewhere, British online fashion retailer ASOS has warned on profit for the third time in eight months, blaming operational issues as it overhauls its warehouses in the United States and Europe. Its shares are seen down as much as 20%. Here are some UK headlines: Britain's easyJet hires Ryanair's operations chief Bramson bids goodbye to Electra, Sherborne's Welker to join board Royal Mail affirms FY targets, sees first quarter in line with view SSE customer numbers dip, sticks to FY forecast Britain's ASOS blames warehouse issues for latest profit alert BRIEF-Stonegate Pub To Buy EI Group For Enterprise Value Of 2.97 Bln Stg BRIEF-Anglo American Says Q2 Production Up 2% (Josephine Mason) ****** RISK OFF IN EUROPE AS STOCK FUTURES FALL SHARPLY (0621 GMT) Oof, the mood in Europe has taken a decisive turn for the worse this morning. Investors are pulling cash out of riskier assets like equities this morning and seeking safety in government bonds, spooked by a slew of bad news from a drop in Japanese export data, a report of stalled progress on Huawei talks to bleak corporate numbers which are deepening concerns about damage from trade conflicts on the global economy. European stock futures have opened at their weakest in nearly three weeks, with trade-sensitive DAX futures leading the charge lower, falling as much as 1.1% in early deals. SAP shares are down as much as 6.6% in early Frankfurt trade after its results, adding to the pressure on the German bourse. (Josephine Mason) ***** ON OUR RADAR: SAP, VOLVO AND RICHEMONT (0602 GMT) Plenty of earnings news to digest this morning. SAP's shares are down more than 3% in pre-market after telling investors they will have to wait til next year for a major improvement in margins as the German business software group reported a 21% decline in Q2 operating profit weighed down by one-off costs. The pressure on shares in Europe's most valuable tech company is likely to cast a pall over the broader DAX. Swedish car maker Volvo reported better-than-expected quarterly operating profits but has launched a cost cutting plan as pricing pressure and the impact of tariffs from the Sino-U.S. trade war dent profitability. That's compounding weak sentiment in the auto sector struggling with the trade conflict, hefty bills to develop electric and driverless cars and an overall downturn in demand. Luxury goods will remain in focus with Richemont delivering a 9% rise in quarterly revenue as strong sales in Asia helped offset sluggish European business and protests in Hong Kong. That follows results from Swatch and Burberry this week which have electrified the companies' shares and the wider sector. Novartis has lifted full-year sales and profit targets, helped by innovative medicine sales and as the Swiss drugmaker's slimmed-down Sandoz generics unit saw accelerating revenue in markets outside the United States. In dealmaking, EssilorLuxottica is eyeing a stake in Dutch optical retailer GrandVision - the French eyewear group has proposed to buy HAL Group's 76.72% stake in GrandVision for 28 euros per share, a premium of about 22% to GrandVision's close on Wednesday. Early headlines: Volvo Cars launches cost cutting measures as trade war dents profit again SAP says big margin gains to wait till 2020 Telia Q2 core profit just above forecast Givaudan confirms 2020 guidance, H1 net profit up 2.3% Eni files fraud complaint, rejigs trading arm over oil tanker fiasco Nordea to review financial targets after Q2 profits drop Wirecard deal with AUTO1 first fruit of SoftBank alliance EssilorLuxottica seeks majority stake in Dutch eyewear firm GrandVision Ubisoft posts Q1 net bookings beat, sticks to outlook Novartis raises 2019 guidance, helped by Sandoz generics unit Italian banks ready to avert another Carige funding failure - sources French rail infrastructure group Alstom's Q1 sales rise Remy Cointreau eyes Q2 acceleration after Q1 sales decline Activist fund Amber Capital demands strategy review at French utility Suez China growth helps Richemont offset sales weakness in Europe (Josephine Mason) ***** FRESH TRADE JITTERS TAKING THEIR TOLL IN EUROPE (0514 GMT) Continued jitters over the U.S.-China trade dispute, coupled with some corporate warnings of slowing demand, are expected to hurt European stocks again today. Taking their lead from weaker Wall Street and Asian markets overnight, IG financial spreadbetters expect London's FTSE to open 25 points lower at 7,510, Frankfurt's DAX to open 101 points lower at 12,240, and Paris' CAC to open 30 points lower at 5,542. In the U.S., CSX shares tumbled 10.3%, their biggest one-day drop in more than a decade, after the rail freight company posted lower-than-expected quarterly profit and cut its full-year revenue forecast. Ongoing trade tensions have contributed to a decline in truck and rail freight volumes in the first half of 2019. The Federal Reserve's Beige Book, a compendium of anecdotes from U.S. businesses, also pointed to trade-related pressures on transportation and manufacturing companies. On the trade front, a WSJ report suggests that Huawei is a stumbling block to even getting talks restarted, while Japan's exports fell yet again in June, as manufacturers' confidence crumbled to a three-year low this month, as a Sino-U.S. tariff row, slowing China growth and rising trade protectionism took their toll on the world's third-biggest economy. (Josephine Mason) ***** (Reporting by Danilo Masoni, Helen Reid, Josephine Mason and Thyagaraju Adinarayan)