LIVE MARKETS-Buybacks break records in Europe

* European shares higher; STOXX 600 up 0.6% * Hopes of ECB, Fed rate cuts boost global stocks * UBS posts surprise Q2 profit boost * AMS forecasts strong third quarter * Autos rise as investors shrug off Conti warning, welcome Faurecia outlook 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 BUYBACKS BREAK RECORDS IN EUROPE (0940 GMT) Equity markets would probably be much less appealing if companies didn't purchase their own stock - but they do. Morgan Stanley strategists led by Graham Secker have dug out some interesting numbers and say companies in Europe should do more buybacks and pay fewer dividends. MS have calculated that European companies have spent a net $100 billion on share buybacks in the last 12 months, the highest run-rate on record, and say buybacks now account for 20% of all shareholder cash returns, another record. Secker and team single out ArcelorMittal, BP, Capgemini, Covestro , Glencore, Repsol and Total among its buyback picks, and give four reasons as to why companies should do more stock buying. 1. Buybacks are currently driving share price outperformance while high dividends are underperforming 2. Buybacks should boost EPS growth 3. Buybacks should boost trading liquidity and demand for the shares 4. The AUM shift under way from active/fundamental to passive/quant arguably increases the importance of buybacks versus dividends The added advantage now is that borrowing costs are falling even further, leaving European corporate balance sheets are in reasonable shape which means they may have capacity to increase buybacks while maintaining their current dividends, the strategist team says. (Danilo Masoni) ***** NO HARD BRAKE FOR AUTOS THIS TIME (0818 GMT) Cars are rallying this morning, thanks to some encouraging parts -- quite literally, it's the auto parts that are fuelling a surprise rally. The STOXX autos & auto parts index is rising 3% this morning, on track for its best day since early April. Parts maker Faurecia has jumped 8.4% after standing by its outlook, a rare bit of positie news from an auto company given the significant slowdown recently in global autos. That's also driving Valeo and Hella higher, both +5.5%. Faurecia is 46.3% owned by Peugeot maker PSA Group (+3%). Traders have been surprised by the rally in tyre maker Continental after its latest profit warning, but they say the bad news has been largely priced in (it was its fourth warning and the shares hit 6-year lows earlier this month). "I would say this is about lots of negative in the price and perhaps some glimmers of optimism. Also some of these auto parts are trading on fairly cheap relative multiples so I guess when you can firm up the degree of the miss there's an element of what is left to play for," says Mark Taylor, sales trader at Mirabaud Securities in London. The chart below illustrates the pain across the sector as it struggles with tougher regulation in Europe and slowing sales in China, one of the world's top auto markets. The MSCI autos sector is valued at 7 times forward earnings, well below the 13x for Europe, while the market has been cutting earnings forecasts for the sector for more than a year, the longest period of downward revisions since the world financial crisis in 2008. (Thyagaraju Adinarayan) ***** OPENING SNAPSHOT: ENCOURAGING UPDATES LIFT EUROPE (0736 GMT) European shares are off to a stronger start today as investors digest a number of encouraging earning updates in banks and tech and even manage to shrug off bad news from the auto sector, suggesting much negativity had already been priced in. AMS rose 9% to its highest since October after the Apple supplier and sensor maker said it expected strong revenue and profit growth in Q3 as an increase in deliveries of its 3D optical sensors helped it swing back to an operational profit in the Q2. Logitech rose 6.9% after the maker of fast keyboards and computer mice reported better-than-expected Q1 earnings. French auto parts maker Faurecia rose 6.5% as it maintained first-half profitability despite a China-led decline in auto production and the loss of seating contracts. Tyre and car parts supplier Continental also rose, up 2%, despite issuing yet another warning. "Conti has warned the market at several occasions in the past 12 months to the extent that expectations have been reset and most of the negatives were already baked in," says Stephane Ekolo, strategist at Tradition in London. Financials provided the biggest boost to the STOXX 600 in early deals with Santander and UBS rising 2.2% and 1.1% respectively after both banks posted better-than-expected results. Here's your opening snapshot: (Danilo Masoni) ***** WHAT WE'RE WATCHING: BANKS, CHIPS AND AUTOS (0702 GMT) Solid earning updates and expectations that the ECB will cut interest rates are set to lift European shares today with futures on euro-zone indexes trading up 0.3-0.6% ahead of the open. FTSE futures are also rising as sterling was on the back foot on the likely appointment of Boris Johnson as UK's next PM. On the corporate front, UBS could inject life into the battered rate-sensitive banking sector. UBS beat forecasts with a $1.4 billion net profit for its second quarter of 2019, as gains in its advisory business softened an investment banking fall and boosted its Swiss retail and corporate banking business. Its shares are up 2% in premarket trade. Still in banks, restructuring costs pushed Santander's net profit down 18%, although traders said the Spanish bank managed to slightly beat expectations. Chips are also set for a positive start after Apple supplier and sensor maker AMS delivered a strong update and the WSJ reported that Apple is in advanced talks to buy Intel smartphone modem chip. AMS shares are up 9% in premarket after the company said it expects strong revenue and profit growth in Q3 as an increase in deliveries of its 3D optical sensors helped it swing back to an operational profit in the Q2. AMS however said it would re-evaluate Osram takeover. News they had even considered a bid was widely criticised last week when it was reported. In the auto sector, tyre and car parts supplier Continental issued its fourth warning in about eighteen months, sending its shares down nearly 4% in premarket trade. Other tyre makers are expected to come under pressure with the news. Continental said it now expects 2019 sales to be around 44-45 billion euros, down from a previous estimate of 45-47 billion euros. Results at Faurecia were a miss although the company confirmed its guidance and some traders see its shares rising at the open, one of the few auto parts suppliers not to warn in recent weeks. Beijing Automotive Group Co confirmed it had purchased a 5% stake in Daimler, sending shares in the German luxury carmaker up in early Frankfurt trade. Elsewhere in earning news, Birkin handbag maker Hermes posted a better-than-expected rise in comparable sales in the second quarter, Norsk Hydro Q2 underlying EBIT fell short of analyst estimates, but Logitech reported better-than-expected Q1 earnings, while French meal vouchers provider Edenred predicted a further rise in operating profit and staffing group Randstad said its underlying earnings slipped 4% in Q2. Other stock movers: Sanofi signs U.S. rights deal with Roche for flu treatment Tamiflu Britain delays decision on Huawei's role in 5G networks Tighter rules hammer IG Group's annual profit Beazley profit jumps on higher insurance rates, raises outlook UK's IQE sees sales hit from U.S.-China trade war Paragon Banking braces for Brexit as loans rise 20% Fevertree HY Rev Rises, Sees FY Results In Line With View UK to scrutinise takeover of satellite firm Inmarsat Campaigners against Heathrow expansion win right to lodge new legal challenge (Danilo Masoni) ***** EARNINGS IN FOCUS: UBS BEATS, CONTI WARNS, AMS SOUNDS UPBEAT (0600 GMT) Truning to the corporate front, there are plenty of earning updates to digest including a positive surprise from UBS, another warning from auto supplier Continental and a upbeat-sounding forecast from Apple supplier and sensor maker AMS. The Swiss banking heavyweight beat forecasts with a $1.4 billion net profit for its Q2, as gains in its advisory business softened an investment banking fall and boosted its Swiss retail and corporate banking business. Still in banks, restructuring costs for the integation of Banco Popular helped pushed Santander's net profit down 18% in Q2, although a trader said the Spanish bank managed to slightly beat expectations. Continental issued its fourth warning in eighteen months, sending its shares down nearly 4% in premarket trade in what could fuel worries about more warning in a sector pressured by trade war risks and slowing demand. Continental said it now expects 2019 sales to be around 44-45 billion euros, down from a previous estimate of 45-47 billion euros. AMS said it expects strong revenue and profit growth in Q3 after an increase in deliveries of its 3D optical sensors helped it swing back to an operational profit in Q2. Eslewhere in earning news, Norsk Hydro Q2 underlying EBIT fell short of analyst estimates but Logitech reported better-than-expected Q1 earnings, while French meal vouchers provider Edenred predicted a further rise in operating profit and staffing group Randstad said its underlying earnings slipped 4% in Q2. (Danilo Masoni) ***** EUROPE SEEN UP (0533 GMT) European shares are expected to open higher this morning in a heavy week for earning updates and ahead of Thursday's ECB meeting where the central bank is expected to prepare the ground for an interest rate cut in September. Spreadbetters at IG expect London's FTSE to open 27 points higher at 7,542, Frankfurt's DAX to open 73 points up at 12,363, and Paris' CAC to open 27 points higher at 5,594. In Asian trading, stocks rose on expectations that the ECB and the Fed will cut rates, while the pound sagged on worries that likely new prime minister Boris Johnson would lead Britain into a no-deal exit from the European Union. In earnings news, today in Europe we have results from UBS, which posted a surprise Q2 profit boost, and Banco Santander, which instead posted a 18% drop in Q2 net profit , while in the U.S. the focus is on Coca Cola, among others. (Danilo Masoni) ***** (Reporting by Danilo Masoni, Josephine Mason and Thyagaraju Adinarayan)