LIVE MARKETS-Closing snapshot: Europe struggles as cars go into reverse

* European shares down 0.3% amid worries about Middle East tensions, nerves ahead of G20 * Daimler's profit warning sends autos stock lower, STOXX autos index -1.2% * German business morale falls again in June * FTSE lone riser among European bourses Welcome to the home for real-time coverage of European equity markets brought to you by Reuters stocks reporters and anchored today by Thyagaraju Adinarayan. Reach him on Messenger to share your thoughts on market moves: rm://thyagaraju.adinarayan.thomsonreuters.com@reuters.net CLOSING SNAPSHOT: EUROPE STRUGGLES AS CARS GO INTO REVERSE (1604 GMT) European stocks have struggled to hold their ground today as investors moved to the sidelines in a broadly risk-off day, which is likely to be the theme for the week ahead of the much-anticipated meeting between Presidents Xi and Trump at the G20 summit at the weekend. The outcome of trade talks could determine market direction for the rest of the year. Trading volume on the STOXX 600 index was 85% of the long-term daily average, reflecting hesitancy among investors. "A dovish Fed has provided one element of reassurance, and a less hostile atmosphere between China and the US would also help stocks to keep moving higher. But the rationale for a deal still seems lacking, and as a result equities could be a due another summer swoon," says Chris Beauchamp, chief market analyst at IG. The pan European STOXX 600 ended down 0.3%, with Frankfurt lagging the region due to the drag from Daimler following its latest profit alert. The cars and auto suppliers index ended the day down 1.2%. London's FTSE 100 was a lone bright spot among major European bourses as sterling fell, providing a boost to multinational companies, from GSK to Diageo. (Josephine Mason) ***** WHO'S WRONG? BONDS, STOCKS OR BOTH (1321 GMT) JPMorgan has weighed in the debate about the conflicting signals sent by cautious bond markets and the buoyant equities to conclude that the contrast may be apparent. While there's little doubt that this year's rally in stocks is at odds with the steep drop seen in bond yields, if you look at market internals, the story is quite different and both markets might actually be getting it wrong. "Looking beneath the surface does not reveal that there is much divergence between equities and bonds," the U.S. bank says, showing how the rally has been driven by a strong leadership of defensives while value plays have underperformed, consistently with the drop in yields. "Our view is that all of these might prove to be too bearish," they say. "We keep a bullish equity view for 2019, believing that the Growth-Policy trade-off is much better than it was in 2018, that the USD might be peaking, curve re-steepening and that the positioning, as well as the sentiment, has room for upside surprise," they conclude. (Danilo Masoni) ***** HOW TO TRADE THE TRADE WAR THIS WEEK (1045 GMT) Investors are treading cautiously this morning ahead of the much-anticipated G20 summit. The Trump-Xi meeting at the weekend could be one of the most influential events for global financial markets for the second half of the year. Hopes have grown that China and the United States may agree a truce to end their protracted trade spat or at least a ceasefire on further tariffs after the two leaders had a phone call earlier this month. Data showing the two economies weakening, U.S. businesses lobbying against trade war escalations and a desire by Trump to claim a victory in the talks would also suggest another ceasefire may be in both countries' interests. "We suspect the most that can be reasonably hoped for is another tariff truce and a new attempt to work out an agreement," says Marc Chandler, chief market strategist at Bannockburn Global Forex. Barclays economists see three scenarios from the G20 meeting: * there's a rising likelihood of a ceasefire with both sides agreeing to halt a further escalation of tariffs and/or non-tariff barriers while high-level talks take place * G20 fails to ease tensions and escalation continues * A more optimistic outcome: be G20 meeting delivers a strong signal/commitment that an agreement is possible in the coming months that involves a gradual winding back, at least in part, of existing tariffs. This could include, for example, reducing the 25% tariffs on $200 billion of Chinese goods to 10% or entirely, conditional on a deal. Here's the bank's more detailed rundown of the implications for each scenario: A more favourable outcome would improve China's growth outlook and market sentiment, Barclays economists say. In the event of a ceasefire, China's GDP growth could improve to 6.2-6.3% (vs the bank's current forecast of 6% assuming a full-blow tariff war take effect from July). That boost to market sentiment may be true only in theory though: significant progress in the talks should add further support to stocks because it would ease worries about the damage to the global economy from tariffs that have dogged financial markets for the past year. But at the same time, an all-out truce or concrete headway in talks would also inject renewed optimism about the global economy, dampening expectations of imminent interest rate cuts in the US and Europe and potentially kill the ebullient mood that swept across the stock market recently, pushing Wall Street to record highs. "From a markets perspective, you could even argue that this is the favourable outcome as the Fed and others would likely then follow through on cutting rates, which may not necessarily be the case in the near term if the meeting goes better than expected," says Craig Earlam, senior market analyst UK & EMEA at Oanda. With those conflicting aspects of the trade spat, expect a cautious market this week. (Josephine Mason) ***** A WATER (H2O) CRISIS THAT DRIED OUT "BUY" CALLS AT NATIXIS (0856 GMT) Analysts have been scrambling to downgrade Natixis after Morningstar flagged liquidity and governance concerns over a bank's fund. The news prompted investors to pull 1.4 billion euros ($1.6 billion) from six funds owned by H2O, the bank's asset management arm, according to KBW analysts citing data from H20's website. Natixis fell 14% over two days on the H2O fallout, but they are off-lows rising 2% today after H2O said that it has sold off some illiquid assets and removed entry fees across its funds as it tries to stem outflows. Analysts at major banks turned bearish right after Morningstar's warning last week with at least four analysts downgrading Natixis by a notch since Thursday. The number of buy ratings on the stock hit the lowest in 1-1/2 years. Now, one in four analysts have a "buy" rating on the stock versus one in two until last month. (see chart below) "Much as we like the equity story at Natixis, in light of this morning's news on the material redemptions at H2O, we view the uncertainty around the outcome at the franchise as too challenging for the stock," Barclays says pointing to outflows. JPMorgan has downgraded to "neutral", saying it builds in the risk from a spillover effect to other parts of the asset management business. (Thyagaraju Adinarayan) ***** CHINA: "BIGGEST BRICK IN AUTO INVESTORS' WALL OF WORRY" (0834 GMT) Autos are in big focus today after higher diesel provision forced German carmaker Daimler to cut its profit outlook. Still, the sector's shares are not exactly falling off a cliff (one trader highlights that there is no real operation issue behind the warning) and looming in the background are perhaps bigger risks, from China demand to U.S. tariffs and European macro concerns. Among these, Barclays says "Chinese car demand remains the biggest brick in auto investors' wall of worry" and that's why they've taken a snapshot of that market to prepare for a trip to China next month. Here are their main points: * "Car sales year to date are down 12% (Jan-May). So far the government's restrained stimulus measures have had limited effect... Only premium autos are proving resilient" * "From now on the year ago base weakens. Mechanically, this should lead to an end of the sharp contraction seen year to date" * "Longer term we continue to believe that China will remain a growth market, given still low vehicle ownership rates... In particular, an ongoing expansion in the premium segment looks plausible" * "Nonetheless, we may well be at the cusp of the transition from a 'high growth' phase to a 'pre-maturity' phase, as replacement demand becomes an increasingly important constituent of overall car demand" (Danilo Masoni) ***** OPENING SNAPSHOT: CARS SKID, RETAILERS RISE, NATIXIS OFF LOWS (0732 GMT) Most of the European indices open higher, but Germany's DAX is underperforming hit by falling auto stocks. Mercedes-Benz maker Daimler is sliding 3% after it cut full-year profit expectations and peers BMW and VW are down 1%. Eurofins Scientific down 4% and is the top faller on the STOXX 600 index after the testing and inspection firm said the recent cyber attack could materally hit profits. Among the risers, Morphosys IS jumping 6% on strong clinical trial data and Orsted is up 5% after it was selected as the preferred bidder for a major U.S. offshore wind project. Retailers are among top performers in Europe, with Metro jumping 5% after an unsolicited takeover offer by two prominent investors and Europe's largest retailer Carrefour rising 2% after it decided to sell majority of its loss-making Chinese business. Natixis has surprised with a 2% rise, against pre-market expectations of a sharp drop, as the bank's fund management arm H2O's statement seems to be soothing worried investors. H2O said it had marked down the value of its funds by up to 7% as it seeks to contain the fallout from reports of its investments in illiquid debt. (Thyagaraju Adinarayan) ***** ON OUR RADAR: CARMAKERS, NATIXIS, METRO (0647 GMT) Futures point to flat to slightly higher open for European stocks with DAX lagging others as a profit warning by Daimler casts a shadow on German auto stocks. Daimler slides 6% in premarket after the Mercedes-Benz maker cut profit expectations as it set aside more money for issues related to its diesel vehicles. BMW and VW shares seen 1-2% lower. German retailer Metro is expected to rise 3.5% after receiving an unsolicited takeover offer by two prominent investors. The company however advised its shareholders to hold off on taking action as the offer "substantially undervalues" the company. Coming off a 14% slump late last week, Natixis is back in focus as its fund management arm H2O said on Monday it had sold some of its non-rated private bonds and removed entry fees across all its funds to attract fresh investors. The move doesn't seem to be enough for investors to regain confidence in Natixis as traders call the shares 3-5% lower citing 1.4 billion euro outflows from H2O. France's Carrefour said it had agreed to sell most of its operations in China, becoming the latest Western retailer to announce a retreat from the Chinese market amid fierce competition from domestic rivals and a growing online market. Carrefour shares seen 1% higher. One trader expects shares in German biotech firm Morphosys to jump 8% on positive clinical trial data. In the UK, Nostrum Oil & Gas Plc said it started a strategic review of the business, which includes a potential sale of the firm. Key headlines: Daimler warns on 2019 profit outlook as diesel issues bite France's Carrefour takes step to leave China with Suning.com deal Natixis' H20 arm sells some of its bonds portfolio Illiquid assets held by Woodford's UK fund pose hurdle to reopening Nostrum Oil & Gas considers sale of company UK consumer spending growth in 2019 to be slowest in six years -EY ITEM Club European stock futures snapshot: (Thyagaraju Adinarayan) ***** DAIMLER'S PROFIT WARNING, METRO TAKEOVER OFFER, H2O SAGA (0554 GMT) Couple of major corporate news from Germany on Sunday and an update from Natixis' H2O on its private bond holdings are making big headlines this morning. Daimler warns on 2019 profits after it expects an increase in expenses linked to "various ongoing governmental proceedings and measures" with regard to Mercedes-Benz diesel vehicles. Daimler shares slide 6% in premarket trade, while peers VW and BMW are down 1%. German retailer Metro said it received unsolicited takeover offer by two prominent investors, but it advised shareholders to hold off on taking action as the offer "substantially undervalues" the company. Metro shares rise 3.5% in premarket trade. H20, the fund management arm of French bank Natixis, said it had sold some of its non-rated private bonds. The move comes after the fund was put in the spotlight last week when Morningstar flagged its review, citing questions over liquidity and governance at the fund. "Following this mark down, triggered by press reports which dried up market liquidity and widened bid-ask spreads, H2O's funds will be priced at a discount between 3% and 7%. H2O has decided to remove all entry fees across all funds until further notice," the fund management company said on Monday. (Thyagaraju Adinarayan) ***** EUROPEAN STOCKS SEEN SLIGHTLY LOWER (0527 GMT) European stocks are expected to open slightly lower on Monday after the pan-European STOXX 600 ended last week posting its third straight week of gains. Financial spreadbetters IG expect London's FTSE to open 16 points lower at 7,392, Frankfurt's DAX to open 56 points down at 12,284, and Paris' CAC to open 10 points lower at 5,518. Daimler in focus after the Mercedes-Benz maker said on Sunday that its operating profit this year is now expected to be at last year's level versus its prior estimate for a slight increase. It cites warning to expected increase in expenses linked to "various ongoing governmental proceedings and measures" with regard to Mercedes-Benz diesel vehicles. (Thyagaraju Adinarayan) ***** ($1 = 0.8782 euros) (Reporting by Danilo Masoni, Helen Reid, Josephine Mason and Thyagaraju Adinarayan)