LIVE MARKETS-When the chips are down

* European shares slightly lower

* DAX lags peers as carmakers, SAP weigh

* Safran knocked lower after Boeing output cut

* U.S.-China trade talks to resume this week after ending on Friday without major progress

* Wall Street weak on earnings anxiety

April 8 - 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

WHEN THE CHIPS ARE DOWN (1441 GMT)

Semiconductors were a favourite sector globally as FAANG fever gripped investors and the

chipmakers which supply to tech giants saw a boom in demand.

But conviction on the sector is fading. Credit Suisse global equity strategists have cut

semiconductors back to neutral, having upgraded them to a "buy" as recently as December 19.

That's even as the Philadelphia Semiconductor Index is just fresh off its record high

hit on Friday, bolstered by optimism over a U.S.-China trade war resolution.

The strategists' reasoning?

* Relative P/E ratios are high, at levels which have preceded underperformance 75% of the

time

* Sector is discounting above-trend growth in the U.S.

* Historically it's the worst-performing sector after a yield curve inversion

* The smartphone cycle is at risk of lengthening as consumers upgrade less frequently

The team at CS stays overweight global tech overall, though, on the basis of its defensive

attributes, saying tech is a hedge against continued Fed dovishness. Their biggest overweight

remains software, while they also like gaming, cyber security, and telecom equipment.

As you can see below, tech has seen a particularly rapid deterioration in earnings

expectations, with analysts now seeing negative growth for the sector this year.

(Helen Reid)

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BIG TECH DISRUPTING TRADITIONAL BANKING (1342 GMT)

Big Tech has disrupted the way we live and is now quickly transforming the financial

services industry too. That's not great news for established banking giants in the United States

and Europe, which are struggling with low interest rates.

In a working paper published today, the Bank for International Settlements (BIS) looks at

how their access to massive amounts of information may give the likes of Amazon, Google and

Tencent an edge over traditional players in areas like credit.

The report underscores the pace of the expansion, which started with payments and has

recently expanded into lending, insurance and even savings and investment products, and how they

may challenge banks in the future.

While BigTech firms currently extend less than 1 percent of global private sector credit,

their footprint is growing, the report shows.

The chart below illustrates the fast pace of new FinTech credit growth in recent years:

Much still needs to be addressed, such as the implications for relationship lending.

For instance, a bank acquires soft information from its clients by developing long-term

relationships, while credit scoring with advanced analytics does not necessarily rely on

long-term, one-to-one relationships, but exploits patterns of consumer preferences and behaviour

using big data.

The report also says such firms may further concentrate market power or even give rise to

new systemic risks. BigTech lenders themselves thrive in countries with less competitive banks

and less strict regulation.

But at the same time BigTech firms may enhance financial inclusion, particularly in emerging

market and developing economies, and contribute to the overall efficiency of financial services.

Still, some now appear to be competing directly with financial institutions and given their

economies of scale and scope, it could also lead to greater concentration, the BIS says.

This chart below illustrate the huge size of the Big Tech companies by market cap compared

with the established banks:

Here's a link to the full report: https://www.bis.org/publ/work779.pdf

(Josephine Mason)

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U.S. STOCKS ARE SO LAST YEAR (1126 GMT)

It may be the end of the U.S.-dominated market we've seen over the past 12 months. Morgan

Stanley recommends investors prefer other regions over the U.S., arguing relative valuations are

stretched and the U.S. equity market faces the most near-term risks from the Q1 earnings season.

"Our economists expect growth differentials to swing back in favour of rest of world growth,

where fiscal policy is easing," write Morgan Stanley strategists.

They see the U.S. dollar weakening as the differential between the U.S. economy and the rest

of the world lessens - and as you can see below, that usually coincides with U.S. equity markets

losing steam.

The cross-asset strategists also advocate being long the FTSE 100, saying a customs union

Brexit deal is their base case, positioning is low and dividend yield is high.

"Much to do in the UK," they write. "'What's in the price' differs sharply across UK assets,

a function of investors stepping back amid Brexit uncertainty."

Here are some of the trades they're pushing at the moment:

* Long rest of world equities versus U.S.

* Long global Value versus Growth

* Long FTSE 100 (unhedged)

* Long U.S. rates volatility

* Long U.S. 10-Year versus Gilts 10-Year

* Short USD index

* Long Indonesia bonds (unhedged)

(Helen Reid)

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EARNINGS SEASON LIKELY TO BE A "REALITY CHECK" (1033 GMT)

The first-quarter earnings season, which kicks off at the end of this week with results from

U.S. banks JPMorgan and Wells Fargo, could bring markets back to earth.

"We see little room for valuations to rise as long as earnings drivers do not materially

turn positive again," writes Christian Stocker, equity strategist at Unicredit.

The upcoming earnings season "might serve as a reality check," he argues, saying earnings

growth is highly likely to be negative over the next few months - which in the past has led to

high volatility and negative equity performance over several months.

Below you can see UniCredit's chart of the EuroStoxx 50 - the shaded areas are the index's

performance following year-on-year earnings growth turning negative. During these periods (there

have been four since 1999), the EuroStoxx 50 declined by an average of 27 percent.

Stocker thus recommends investors remain defensively positioned, highlighting that defensive

sectors have continued to outperform the market in another sign that the rally is not based on

an improvement in fundamentals, but rather on sentiment.

(Helen Reid)

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BEER STORM BREWING IN AFRICA? (1018 GMT)

About 30 percent of the world's global beer volume growth will come from Africa in the next

decade, Morgan Stanley analysts say. Competition is ratcheting up in the region.

Africa accounted for 7 percent of global beer volume last year, but that's expected to jump

to 14 percent by 2025. Analysts see this driven by rising income.

An interesting way to calculate the consumption is per capita consumption (PCC) - typically

more income leads to higher PCC, they add.

"This is not necessarily because people begin consuming alcohol at certain level of wealth,

but transition away from the illicit segment," say the bank's equity analysts.

So, given the expected surge in demand, it's going to be closely fought battle for market

share between brewers ABInBev, Heineken and Diageo.

Morgan Stanley says the bulk of this growth looks set to be captured by ABInBev and Castel,

a privately owned company in which ABInBev has a 22-percent stake.

But Heineken CFO recently said in a Morgan Stanley conference in November that a number of

monopolies that were easily defendable 10 years ago may be under threat.

The bank cites the CFO as saying: "Wherever you have a monopoly, you also have a

possibility/a temptation to enter and offer more choice to the consumer and then try and disrupt

the market."

For now, it might be a bit of early froth (pun intended). European markets aren't quite

ready to join the party, with all of the indices in red and Germany's DAX 0.5 percent down

lagging rest of Europe.

(Thyagaraju Adinarayan)

ECB BUYING EQUITIES: FANCIFUL IDEA OR GAME-CHANGING OPTION? (0940 GMT)

With the ECB's next meeting on Wednesday, talk of tiered rates to help banks is doing the

rounds as the central bank looks to shore up the faltering euro-zone economy.

No policy changes are expected, but investors are hoping for details on the terms of the

TLTROs (cheap loans) due to be issued in September, the pros and cons of a possible tiering

scheme for deposit rates if interest rates stay lower for longer and contingency planning for a

no-deal Brexit.

NatWest Markets' global head of desk strategy James McCormick says he doesn't expect TLTRO

details to be rolled out until the June meeting and rate tiering in September or later, if at

all.

Deutsche Bank economists are betting on reserve tiering in the coming months, but it is

unlikely that any new policy will be announced as early as Wednesday.

They reckon TLTRO is sufficient for now to counteract the funding tail-risks.

But further down the road, what if those measures don't work their magic? That's when things

could get even more interesting.

Two options that have been debated would be market game changers, McCormick says. The first

is an aggressive fiscal easing in Germany, which is the epicentre of the current euro-area

slowdown.

Trouble here is that German fiscal policy is already loosening and the economic weakness is

not yet widespread. As such, McCormick views this as a clear option, but not one likely to come

any time soon.

The other option is whether the ECB could buy equities. The ECB's dovish March meeting

prompted a lot of talk that the bank could follow in the Bank of Japan's footsteps, keeping

policy rates ultra-low for two decades and adopting ever more radical measures such as buying

equities.

"This sounds fanciful, but so did ECB QE not so long ago," McCormick quips.

"And one thing I'd say is that there is a rationale for the ECB to buy equities – European

equities are near record cheap vs credit (partly due to ECB credit buying) and not far from

there compared to Bunds."

(Josephine Mason)

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AUTOS 2.0: A COSTLY RIDE (0757 GMT)

Consolidating, co-operating and reducing costs is the way to go for European carmakers,

Morgan Stanley analysts say, as the new technology to move to electric vehicles costs "a lot of

money."

"Instead of simply spending more money on new technologies, which has depressed FCF (free

cash flows), OEMs are deciding to cut costs and/or share technologies to reduce investment

headwinds," the analysts write.

They note some recent tie-ups in the space, including VW-Ford co-operation,

Toyota-Softbank-Uber strategic tie-up for self-driving technology, talks between Fiat Chrysler

and Peugeot, among others.

Morgan Stanley sees potential for more.

European carmakers investment spend has almost doubled in the last 10 years to an estimated

60 billion euros ($67 billion) this year, hitting their cash flows.

Morgan Stanley lists some "most obvious" ways autos could reduce costs:

1. More outsourcing to China

2. Modular platforms - using key parts for multiple models

3. Share modular platforms with other carmakers

4. Co-operation at technology levels

5. Reducing the number of models, engines, transmissions, and even colours

(Thyagaraju Adinarayan)

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OPENING SNAPSHOT: EUROPE PAUSES (0738 GMT)

As expected, STOXX 600 is slightly lower with investors taking a breather after the

market hit fresh August highs on Friday and hoping for fresh news from the U.S.-China trade

talks, while Frankfurt is lagging after a string of bad corporate and macroeconomic news.

A pause was overdue after the meteoric gains so far this year and traders say a truce

between the world's top two economies is likely priced into the market, although the terms of

any deal are still unclear, with talks ended on Friday without significant progress.

In Germany, weak trade data have raised fresh concerns about the health of Europe's largest

economy, SAP shares are down 1.5 percent after its cloud chief became the latest in a string of

high-level departures and BMW is down 1.2 percent after warning a hefty fine from the European

watchdog will hurt profits as it set aside 1 billion euros.

Shares in Boeing supplier Safran are at the bottom of the CAC 40, scaling back from record

highs it hit on Friday, after Boeing cut its monthly output for its 737 aircraft.

Oil & gas and mining stocks are among the gainers on higher crude and copper prices and

supported by a hint from Beijing of more stimulus after the government said it will continue to

cut banks' required reserve ratios, in a further push to spur more lending to small- and

medium-sized companies and shore up the slowing economy.

Here's your snapshot:

(Josephine Mason)

*****

ON OUR RADAR: GERMAN CARS, EXPORT DATA DRAG ON FRANKFURT (0657 GMT)

Frankfurt's DAX is lagging its European peers this morning as carmakers drag after EU

antitrust regulators charged BMW, Daimler and VW with colluding to block the rollout of clean

emissions technology and weak export data cast fresh doubt on the health of Europe's largest

economy.

BMW's shares are down almost 3 percent after warning it expects a significant" fine that

will hurt 2019 results as it set aside 1 billion euro. Its shares are down almost 3

percent in early trade, and Daimler is down more than 2 percent.

Under a worst-case scenario, carmakers could face a fine as much as 10 percent of global

revenues, says Citi in a note this morning.

"While we have limited visibility on the eventual outcome of the case, applying a similar

downgrade as seen at BMW we estimate this could imply a provision of 2.4 bln euro at VW and 1.7

bln euro at Daimler," they say.

European stocks are expected to open lower this morning as investors lock in profits after

the pan European STOXX 600 scaled fresh August highs on Friday and await further details from

the Beijing-Washington trade talks. Futures are down between 0.1-0.4 percent.

The latest round of negotiations to resolve the spat that has rattled global markets over

the past year ended on Friday with few details of progress.

In other corporate news, Boeing suppliers - including French aerospace group Safran which

makes the planemaker's engines - could be under pressure after the U.S. company said it would

cut monthly output of its 737 aircraft by nearly 20 percent in the wake of two deadly crashes.

Airbus may get a lift from its rival's deepening woes.

German residential property group Deutsche Wohnen is under pressure after thousands of

Berlin residents took to the streets on Saturday to vent anger over surging rents and demand the

expropriation of more than 200,000 apartments sold off to big private landlords, which they

blame for changing the character of the city.

A report that UBS is interested in buying Julius Baer may stir hopes of more M&A in banking.

Shares in Julius Baer are seen up 1-4 percent. France's finance minister signalled he supports

efforts to further consolidate the euro zone's fragmented banking industry.

Italy's third biggest lender, Banco BPM, could be interested in tie-ups with banks close to

its home turf in the north of the country, its CEO said on Saturday in comments that appeared to

play down a possible deal with Monte dei Paschi di Siena.

(Josephine Mason)

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EUROPE FUTURES DOWN: BANKS, PLANES AND AUTOMOBILES IN FOCUS (0619 GMT)

European stocks futures are lower this morning, with Frankfurt lagging its peers, as

investors lock in profits after the pan European STOXX 600 touched fresh August highs on Friday

and await further details from the Beijing-Washington trade talks.

The latest round of negotiations to resolve the spat that has rattled global markets over

the past year ended on Friday with few details of progress.

In corporate news, banks, planes and automobiles are catching the main headlines today.

Boeing suppliers may get hit by news on Friday that the U.S airplane maker will cut

production of its 737 aircraft by nearly 20 percent in the wake of two deadly crashes.

The move suggests it does not expect aviation authorities to allow the plane back in the air

anytime soon. Deliveries of its bestselling aircraft have been frozen since the March 10

incident. Safran, Senior, Meggitt and Melrose Industries count Boeing as their biggest customer.

BMW shares are indicating down almost 3 percent in early Frankfurt trade after putting aside

1 billion euro ($1.12 billion) for fines it faces after EU antitrust regulators charged the

German carmaker, VW and Daimler with colluding to block the rollout of clean emissions

technology.

Keep an eye on Italian banks. Reuters reported on Sunday that Rome will probably raise its

2020 budget deficit goal to around 2.1 percent of GDP this week, well above the 1.8 percent

targeted in December as the government struggles to keep its finances in check.

France's finance minister signalled he supports efforts to further consolidate the euro

zone's fragmented banking industry.

Italy to hike 2020 deficit goal to around 2.1 percent -sources

UPDATE 1-EU says Italy's slower growth might trigger spending freeze

Carlyle agrees to buy 30 pct stake in Spain's Cepsa - FT

EXCLUSIVE-Deutsche Bank open to U.S. revamp in merger talks -sources

UPDATE 3-Petrobras agrees to sell pipeline unit to Engie for $8.6 bln

UK competition watchdog probes Visa's acquisition of Earthport

UPDATE 1-Italy to consider backing legal action against former Monte dei Paschi execs

KKR plans IPO for Swiss group SoftwareONE - sources

Berlin activists march to demand city seize housing from landlords

Air France KLM's March passenger numbers rise 3.4 pct y/y

(Josephine Mason and Thyagaraju Adinarayan)

*****

EUROPE SEEN LOWER (0525 GMT)

European stocks are expected to open lower after last week's relatively strong run up,

although they may find support from broader markets overnight after more positive signals from

China about its stimulus programme.

Investors are likely to welcome news on Sunday from China that the government says it will

continue to cut banks' required reserve ratios, in a further push to spur more lending to small-

and medium-sized companies as Beijing aims to shore up the slowing economy.

Oil stocks will be in focus after crude prices shot to their highest since November 2018 due

to OPEC's ongoing supply cuts and U.S. sanctions against Iraq and Venezuela. Tensions in Libya

also supported.

Asian shares inched up to seven-month highs as investors cheered a rebound in U.S. payrolls

and hints of more stimulus in China, though there was some caution ahead of what is likely to be

a tough U.S. earnings season.

Financial spreadbetters expect London's FTSE to open 9 points lower at 7,438, Frankfurt's

DAX to open 33 points lower at 11,977 and Paris' CAC to open 1 point lower at 5,476.

(Josephine Mason)

*****

($1 = 0.8909 euros)

(Reporting by Danilo Masoni, Helen Reid, Julien Ponthus and Josephine Mason)