LIVE MARKETS-Closing snapshot: it could have been worse

April 3 - Welcome to the home for real-time coverage of European equity markets brought to

you by Reuters stocks reporters and anchored today by Helen Reid. Reach her on Messenger to

share your thoughts on market moves: helen.reid.thomsonreuters.com@reuters.net

CLOSING SNAPSHOT: IT COULD HAVE BEEN WORSE (1610 GMT)

A slight rebound on Wall Street helped European stocks recoup some of their losses and the

STOXX 600 has finished the day down 0.5 percent, half of what it was losing in morning trading.

Here's what it looked like at the close:

(Julien Ponthus)

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SIGN OF THE TIMES: UTILITIES OVERTAKE TECH AS DEFENSIVES GAIN MOMENTUM (1506 GMT)

If you were in the market for a sign that defensives were gaining momentum, here you go:

utilities have just overtaken tech stocks in Europe. As you can see below the utilities sector

has just gone above the tech index if you look back since the beginning of the

year:

This other chart was used by DNB (LSE: 0O84.L - news) markets this morning to illustrate how "the defensive

Utilities sector has started to outperform" the FANG+ index in the U.S.

(Julien Ponthus)

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THE TEST FOR TECH (1430 GMT)

The upcoming earnings season will be a test for one sector in particular: tech.

With (Other OTC: WWTH - news) the recent reports over data misuse at Facebook (NasdaqGS: FB - news) , concerns over autonomous driving with

Tesla and U.S. President Donald Trump's attack on Amazon, investors will be in search of some

good news to reassure them that these companies are seeing growth and all is well.

Analysts at TS Lombard say "not all tech is the same" and point out that companies such as

Facebook and Google have already managed to change the world, and are trading at "very

reasonable multiples considering their earnings growth".

TS Lombard highlight other cheaper areas of the tech world, such as internet software &

services, semis and technology hardware, storage and equipment firms.

Christophe Jaubert, Mediolanum Asset Management’s head of investment, said that while they

are positive on the broad technology sector, they see its primary risk coming from higher

regulation.

"Revenues and earnings continue to grow strongly and valuations have become increasingly

attractive following the recent sell-off. The strong earnings momentum differentiates the

current technology companies to those of the late 1990’s dotcom bubble," says Mediolanum Asset

Management's Jaubert.

We will however have to wait around two weeks more to see how both European and U.S. tech

firms fared in Q1, with eBay reporting on April 17 and ASML (Milan: ASML.MI - news) on April 18.

(Kit Rees and Helen Reid)

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VOLATILITY IS THE FLAVOUR OF THE DAY (1355 GMT)

The return of volatility and how to deal with it is definitely one of the key topics

developed in today's research notes.

Make your peace with it, it is here to stay and not necessarily a bad thing, analysts are

telling their clients.

"Like a diver hitherto stuck under the surface of a frozen river, volatility has finally

found a way out and there is no going back under the surface again," Socgen (Paris: FR0000130809 - news) analysts argue

adding that "multiple signals points to the low vol regime being a thing of the past".

"There is certainly no shortage of reasons to be fearful," IG (Frankfurt: A0EARV - news) notes while UBS (LSE: 0QNR.L - news) takes the view

that a "broadening array of outcomes for key macroeconomic variables, gradual removal of

monetary policy support suggest higher volatility regime is likely to persist".

Not to mention that trade war thing: "We are braced for more volatile trading days as market

participants will have to constantly assess the risk of a full scale trade war based on tweets

from President Trump and responses from the US’ trading partners," Rabobank says.

For Amundi, "financial markets are getting nervous, experiencing the fatigue of a more

mature phase with new sources of volatility arising". The French asset manager tells its clients

that "hedging strategies remain paramount" given the risks of a new market correction.

On the optimistic side, La Financiere de l'Echiquier urges its clients to see "these moments

of market stress for what they are: opportunities" and Nigel Green, the founder and CEO of

deVere, take the view that "some of the most successful investors embrace some volatility as

major buying opportunities".

Here's a look at the VIX since 1990 and how it hit its lowest level ever in November last

year:

(Julien Ponthus)

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HIGHER VOLATILITY AND DISPERSION BODE WELL FOR ACTIVE MANAGERS (1312 GMT)

Is this the "market active managers have been waiting for since the financial crisis"?

UBS thinks so.

Why is that? Two words: volatility, and dispersion.

"We are in the early stages of a multi-year higher volatility and higher return dispersion

regime that is likely to offer high conviction active managers the opportunity to generate

significant alpha," write UBS strategists.

Dispersion in U.S. stocks since the end of the financial crisis has been significantly lower

than the longer-term average, they say. And as index volatility rises, stock return dispersion

should follow.

In the placid environment of the past few years "there is little apparent reward for paying

up for active management" (hence the ascendancy of passive) but that could be about to change.

Academics UBS cites have found higher dispersion usually accompanies higher returns for

active managers. The opportunity set is that much wider if dispersion is higher.

Below you can see S&P 500 stock correlations touched a low recently, but have risen slightly

since. Low correlation, high dispersion environments are fertile ground for active management.

But it's up to active managers, in the end, what they do with that opportunity.

"Time (Frankfurt: A11312 - news) will tell if they deliver," UBS concludes.

(Helen Reid)

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CONCERNS "OVERBLOWN" AS TRADE WAR RISK FADES (1222 GMT)

Along with U.S. futures pointing to a brighter trading session across the pond, Goldman

Sachs is pretty optimistic we are over the worst, as we turn the page after a tumultuous Q1.

"While Q2 is off to a shaky start, we think most of the common concerns are overblown,"

write Goldman Sachs (NYSE: GS-PB - news) global market strategists. "The elevated VIX seems to be a technical

distortion, the strong global growth outlook appears intact and near-term trade risk has likely

peaked."

They acknowledge some weaker spots in economic activity data, but argue that the risk of a

“trade war” is mostly behind us. Higher volatility, meanwhile, is just a consequence of the rare

spike in February rather than a sign of concern, they say.

Accordingly, GS keeps its "top trades" for 2018 the same as at the start of the year. These

include an outright long in EM equities, where they think it is too soon to turn defensive.

Below you can see all ten top trades and how they've performed so far:

(Helen Reid)

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EUROPE OFF LOWS, BUT DAYS AHEAD COULD BE "CHOPPY" (1131 GMT)

At the halfway mark of today's trading and even though European stocks are off their lows,

they're still stuck in negative territory. Wall Street futures are pointing to a slight recovery

for U.S. stocks, however.

Overall markets could be "choppy" over the next few days, say strategists from UBS global

wealth management chief investment office, ahead of key events such as U.S. non-farm payrolls on

Friday and the start of the Q1 earnings season.

Here's your midday snapshot:

(Kit Rees)

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SPOTIFY DEBUT COULD SUPPORT VIVENDI (1052 GMT)

Several pre-market indications saw Vivendi (LSE: 0IIF.L - news) shares being boosted by the much-anticipated

public debut of Spotify. But why is this?

The entry to public trading, which Spotify is - unusually - doing through a direct listing

rather than an initial public offering, could underpin Vivendi's premium valuation, a trader

explains.

Vivendi trades at a higher price/earnings than its media sector peers (see below).

Some 48 percent of Vivendi's revenues come from Universal Music Group, the trader points

out. Universal is one of the four key suppliers of music for Spotify, and the latter going

public will help analysts pin down a figure for Universal's value. The listing of Spotify was

also cited as a "catalyst" for Vivendi by Liberum analysts earlier this year.

Today Vivendi shares are trading down 0.5 percent - around in line with the market. They'll

be ones to watch when Spotify prices go live at 1330 GMT.

(Helen Reid)

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ARE WE NEARING THE END OF THE BULL MARKET? (1023 GMT)

Artur Baluszynski, head of research at Henderson Rowe, reckons we might be "approaching

final stages".

"Volatility is picking up, USD has been selling off since 2017(despite Fed’s interest rate

hiking) which might indicate foreign investors getting bearish on USD assets," he says.

The appreciation of the euro in contrast will be a dampener to the European recovery story -

"Strong Euro usually re-ignites Eurozone's debt problems."

Accordingly Baluszynski prefers Asia and Emerging Markets, while picking quality firms in

Europe and U.S.

UBS' Americas CIO Mike Ryan has a more bullish view, pointing to still calm bond markets as

an indicator that any stress is contained and temporary.

"Despite the steep sell-off in equity markets, bonds were little changed, suggesting that

Monday’s market action was largely unrelated to concerns about growth," writes Ryan.

Growth dynamics have remained largely unaffected by the trade rhetoric, he adds. "With

corporate earnings still poised to rise sharply in the aftermath of tax reform, we look for

equity markets to continue to grind higher."

(Helen Reid)

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OUTPERFORMANCE? IT'S SMALL, DEFENSIVE AND DEFINITELY NOT BRITISH (0931 GMT)

Looking back at the last quarter, there are a few clear takeaways for European equities so

far this year, JP Morgan's analysts write in a morning note.

Small caps clearly outperform large stocks year-to-date and in that group, countries at the

periphery of the Euro zone like Greece or Spain are clear outperformers while the UK lags

behind:

Also interesting to note that defensive stocks are clearly taking the lead, as you can see

in this last chart:

(Julien Ponthus)

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OPENING SNAPSHOT: A WEAK START FOR EUROPEAN EQUITIES (0719 GMT)

It's a damp start to Q2 trading for European equities with tech stocks --specifically

semiconductors-- leading losses, with industrials, consumer staples and financials also adding

pressure.

One bright spot early on are mining stocks, which are gaining on the back of solid

manufacturing data out of China which has buoyed metals prices.

But the broad picture suggests that worries over trade and the tech sector which hit

equities in March haven't gone away yet.

One of the biggest movers so far is French food services and facilities management group

Sodexo, down at the bottom of the STOXX following a downgrade from Goldman. Sodexo

slid nearly 16 percent in the previous session after warning on sales and profits.

Here's your opening snapshot:

(Kit Rees)

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WHAT'S ON THE RADAR FOR THE EUROPEAN OPEN (0648 GMT)

At the start of the second quarter, things aren't looking so hot for European shares.

Futures are trading down 0.6 to 1.2 percent across the major benchmarks as the region is set to

catch up with other global markets after two days of closure, emerging from a long weekend into

a febrile trade environment with growing pressure on the tech sector.

Beijing’s retaliation against U.S. tariffs sent Asian shares tumbling overnight and dented

risk appetite, while tech stocks were also hit hard after President Trump attacked Amazon.com (NasdaqGS: AMZN - news) .

An overnight report that Apple (NasdaqGS: AAPL - news) plans to replace Intel (Euronext: INCO.NX - news) chips in Mac computers with its own is

likely to weigh further on European Apple suppliers, with traders indicating the semiconductor

firms down 2 percent.

In acquisition news, Vedanta and ArcelorMittal (LSE: 0NSF.L - news) are two European companies among the suitors

for bankrupt steelmaker Essar Steel India.

Also one to watch in M&A developments will be Britain’s Sky (Frankfurt: 893517 - news) after Twenty-First Century Fox

said it submitted a new set of remedies to the UK competition regulator in order to push through

with its takeover of the UK media company. the U.S. firm could legally separate Sky News within

the wider group to allay the regulator's concens.

In other company news and potential stock movers:

Compugen (NasdaqGM: CGEN - news) , AstraZeneca (NYSE: AZN - news) unit in cancer drug development deal;

Apple plans to replace Intel chips in Macs with its own –Bloomberg;

Strike-hit Air France (Paris: FR0000031122 - news) expects 75 pct of flights to operate, as rail stoppage looms;

ArcelorMittal, Vedanta, VTB-JSW partnership among India Essar Steel suitors;

Bossard Holding (Frankfurt: A111WS - news) says starts Q1 with strong performance;

Murdoch's Fox could separate Sky News to satisfy UK regulator on takeover;

Silicon Valley, Wall Street taking notes on Spotify debut

(Helen Reid)

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FEELING NOT SO CHIPPER (0635 GMT)

Another piece of news which could cloud sentiment further around tech stocks is a media

report that Apple is planning to use its own chips in Mac computers beginning as early as 2020.

This would replace processors from Intel Corp, whose shares ended yesterday down 6

percent.

In the past news that Apple is making plans to take chip-making in-house hasn't gone down

well with the market, with shares in the likes of Dialog Semiconductor (LSE: 0OLN.L - news) hit over the

past year on concerns that Apple is developing its own battery-saving chips for iPhones.

And remember Imagination Technologies (Other OTC: IGNMF - news) , which put itself up for sale last year after being

ditched by Apple, its biggest customer?

Traders are calling shares in European semis down around 2 percent on the back of the

report.

(Kit Rees)

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EUROPEAN STOCK FUTURES FALL (0612 GMT)

Futures have opened down 0.6 to 1.1 percent across the major European benchmarks as stock

investors prepare for a sell-off to spread to Europe.

In economic news today, manufacturing PMIs will be released this morning for Europe and the

UK. Europe's reading is likely to be the same as previous estimates, while the UK PMI is likely

to have fallen, SocGen strategists say. "The series already looked toppy, and snow falls in

March disrupted activity," they write in a morning note.

(Helen Reid)

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EUROPEAN CORPORATE NEWS ROUND-UP (0555 GMT)

In global equities news, Spotify's IPO on the New York Stock Exchange is the biggest focus

today, and will be a particularly interesting one to watch given the pressures hitting Facebook,

Amazon and other big tech stocks whose ascendancy has rarely been questioned in the past few

years.

In Europe, corporate news is relatively sparse but here are some headlines which could make

waves in the stock market:

British firm De La Rue (Other OTC: DELRF - news) to challenge government on passport contract

Strike-hit Air France expects 75 pct of flights to operate, as rail stoppage looms

European Medicines Agency to review Sanofi (LSE: 0O59.L - news) -Regeneron's Dupixent, Cemiplimab

LVMH names Van Assche as new Berluti artistic director

ArcelorMittal, Vedanta, VTB-JSW partnership among India Essar Steel suitors

Total (LSE: 524773.L - news) , Tikehau target 1 bln euro energy transition fund

(Helen Reid)

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MORNING CALL: NO EASTER CHEER FOR EUROPEAN STOCKS (0532 GMT)

Good morning and welcome to Live Markets.

European stocks are called to open sharply lower this Tuesday after a long weekend,

following the lead of Asian markets which tumbled as China retaliated against U.S. tariffs in a

deepening trade row.

Asian shares sold off overnight as trade tensions escalated and souring sentiment on global

technology companies continued to weigh on markets.

Beijing hit back against Washington by increasing tariffs by up to 25 percent on 128 U.S.

products, effective yesterday.

Spreadbetters call the DAX 115 points lower at 11,982, the CAC 40 down 52 points at 5,115,

and the FTSE 100 46 points lower at 7,011.

(Helen Reid)

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(Reporting by Danilo Masoni, Helen Reid, Kit Rees and Julien Ponthus)