LIVE MARKETS-Closing snapshot: Europe clings onto gains after choppy day

* European shares find floor after heavy two-day sell off

* STOXX 600 in choppy waters, closes up 0.2 pct, DAX up 0.7 pct

* Euro zone volatility jumps to January levels

* Siemens steals show with gas spin off and strong results

* Defensives come under pressure after gains, banks fall further

* Wall Street struggles for direction as crucial trade talks loom

May 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: rm://josephine.mason.thomsonreuters.com@reuters.net

CLOSING SNAPSHOT: EUROPE CLINGS ONTO GAINS AFTER CHOPPY DAY (1632 GMT)

It's been a turbulent day for European stocks, finishing on a deceptively calm note. The

damage may be far from over, though, as some strong words from China just after the close

indicate.

The Chinese commerce ministry said it will have to take necessary retaliatory measures if

the U.S. decides to raise trade tariffs on May 10.

Such an escalation, leading to a complete break-down of negotiations, has a 5 percent chance

of happening, according to Nomura analysts, who however expect further negotiations to be needed

before a deal is struck.

European stocks took solace, though, from a Trump tweet claiming China is coming to the U.S.

"to make a deal" - and tech and industrials stocks rose quite strongly partly due to that.

Siemens also gave a much-needed boost to the industrials sector, up 4.6 percent after it

announced the spin-off of its gas turbines business and better earnings.

FTSE 100 companies fared worse: ITV fell 6.1 percent after reporting weak ad demand hit Q1

revenue, and Imperial Brands tumbled 6.3 percent on weaker than expected e-cigarette sales.

(Helen Reid)

*****

BEWARE OF BANK BEATS (1442 GMT)

Morgan Stanley has taken a look at how European banks fared through the earnings season and

even though most beat expectations, there's little to be too upbeat about going forward.

"Banks beat low expectations, yet we cut EPS 1 percent further in 2019/2020, as beats appear

unsustainable," analysts at the U.S. bank say. "Nearly 70% of banks which have reported so far

beat at the PBT level, but adjusted for quality, results are more mixed with ~45% of banks

missing pre-provision profit estimates".

In more detail, they highlight how net interest income trends were disappointing, down 2

percent compared to the previous quarter, while loan growth trends surprised positively at most

banks and capital prints stabilised.

They also highlight that investment banks beat on low expectations, particularly across

FICC, but the outlook ain't great either: "We still see structural revenue pressures in the IB

space, with Q2 providing little respite".

Over the past year Europe's bank stocks have clearly underperformed the broader market by

around 16 percent and their earnings downgrades have rarely outnumbered downgrades:

(Danilo Masoni)

*****

A SHORT-LIVED BOOST FROM TRUMP'S TWEETS (1341 GMT)

A tweet from U.S. President Trump saying China is coming to the U.S. "to make a deal" has

been interpreted positively by some traders, boosting the STOXX, DAX, and U.S. futures.

A trader says the fact Trump said China is coming to *make* a deal, rather than to discuss,

was enough to boost the market.

The lift hasn't lasted long, though, as the overall tone from the U.S. leader is pretty

negative: Trump said he is "very happy" keeping the current tariffs on Chinese imports in place.

Regardless, it's clear the market remains hyper-sensitive to any trade developments.

The tweets in question:

"Personally I don't think this is a reason to buy," notes a Milan-based trader.

(Helen Reid)

*****

A LUXURY RENAISSANCE? (1144 GMT)

As China's stimulus measures soothe the economy, helping revive the consumption European

luxury brands depend on, those luxury companies could become more attractive to investors keen

for exposure to a Chinese recovery.

After a torrid 2018, MSCI's European luxury stocks index has surged up 23 percent since its

Jan 3 low, and earnings revisions have also been ticking up as results from luxury giants

including LVMH and Kering impress the market.

Morgan Stanley analysts upgrade Swatch and reckon there's reason to be positive on luxury.

"Q1 trading statements showed stronger than expected sales growth year-to-date for most

industry participants, and our discussions with industry contacts have been encouraging," they

write, adding that a weakening of the euro and Swiss franc vs the USD and the Yuan also helps.

Monetary and fiscal stimulus is helping consumption, they argue, pointing to Hugo Boss

comments about an acceleration of sales growth in mainland China in April after a VAT cut to 13

percent from 16 percent.

In light of the re-escalation of trade tariff rhetoric between the U.S. and China, they do,

however, give a word of warning: "there is a possibility that our incrementally more positive

view on the earnings trajectory of the European luxury goods sector could prove premature."

MS are overweight LVMH (their top pick) and Moncler, underweight Tod's, Ferragamo and Hugo

Boss, and equal weight Prada, EssilorLuxottica, Richemont, Kering, Burberry, Swatch, and Hermes.

(Helen Reid)

*****

CHINA HEADLINES MAKE EUROPE TRADING CHOPPY; DAX FALLS (0957 GMT)

Waters are choppy for shares here in Europe as traders continue to watch maniacally for

headlines from the Sino-U.S. trade front that could provide clues about the future of this

week's make-or-break trade talks in the United States.

The latest news that grabbed Mr Market's attention was a source based story from Reuters.

The report outlines how Beijing on Friday walked back nearly all its pledges in a

nearly 150-page draft trade deal, prompting Trump's ire in a series of tweets on Sunday, which

highlights how the U.S. President may not just be embarking on an Art-of-the-Deal-type

backtrack.

Here are the headlines and below the move they caused on the trade-sensitive German DAX

benchmark index, last trading down 0.2 percent having risen as much as 0.7 percent

earlier.

"The DAX turns lower... the situation is truly complicated," says a trader.

REMINDER: Chinese Vice Premier Liu He is due to visit Washington tomorrow and Friday for

talks in a last-ditch bid to avert a sharp increase in tariffs on Chinese goods ordered by U.S.

President Donald Trump that would go into effect at midnight on Friday.

(Danilo Masoni)

*****

A REPEAT OF DECEMBER? FASTEN YOUR SEATBELTS! (0905 GMT)

It's been a rollercoaster ride for global markets over the past few days as investors remain

on edge after Trump's flurry of tweets on Sunday that has shaken confidence in the U.S.-China

trade talks.

That confidence has been one of the main drivers in the months-long rally across global

stock markets.

With uncertainty back in full force, UBS Global Wealth Management CIO Mark Haefele says

clients should be prepared for "potentially significant volatility ahead" and hold onto their

hats.

"If investors don't think they can stomach it, it would be better to reduce risk, or hedge

positions, now. My biggest fear for our clients today is that we see a repeat of December, with

too many selling out at the bottom and not getting back in again in time for the rally."

What if the talks break down and Washington slaps higher tariffs on more Chinese imports

later this week?

In a worst-case scenario, Haefele warns that U.S. stocks could fall 10-15 percent from their

peak and Chinese stocks could sell off by 15-20 percent. Europe, with its exposure to China, is

unlikely to be unscathed either.

(Thyagaraju Adinarayan)

*****

MORE ON EARNINGS (0853 GMT)

More signs that Q1 earnings in Europe are improving: Refinitiv I/B/E/S has revised upwards

its Q1 earnings forecast for the first time since late February.

Analysts on average now expect Q1 earnings per share for STOXX 600-listed companies to fall

3 percent, up sharply from a drop of 4.2 percent last week, according to the latest I/B/E/S data

from Refinitiv released last night. That compares with 4.3 percent growth a year ago.

As in previous blogs and stories, this highlights just how low expectations were heading

into the results season. Also see last week's blog: Europe's rallying but analysts are still

cutting Q1 estimates.

Still, the cheerier-than-expected results may help shore up confidence as investors continue

to fret about the U.S.-China trade conflict.

Consensus for the MSCI Europe continues to improve too, with a 4.6 percent drop expected in

Europe, up from a 4.8 percent decline last week, although the region's still on track for the

slowest pace of earnings growth in three years as this chart shows:

(Josephine Mason)

MEANWHILE, EARNINGS CONTINUE TO BEAT... (0814 GMT)

Trade angst and Brexit uncertainty are helping stocks start May on a backfoot but corporate

profits continue to beat expectations, and that points to a return of earnings momentum, a

welcome development for investors even though the bar had been lowered quite a bit.

Here's the latest take on the European earning season from Morgan Stanley.

"1Q has seen the strongest breadth of earnings beats in two years, but much of this reflects

earnings expectations coming down dramatically ahead of results. Earnings are tracking down 5%

year-on-year in 1Q, but we see increasing signs of stabilisation in FY19 estimates," they say.

A similar trend of earnings stabilisation has also been detected for world stocks, as we

pointed out in this blog yesterday: Wanna bet: world stocks at record highs by summer 2020?

Also see our story from last week that checks in on earnings halfway through the season:

ANALYSIS-Half-time: Europe Inc scores to avert Q1 disaster, hopes of a rebound rise

(Danilo Masoni)

*****

OPENING SNAPSHOT: TRADE TENSIONS PRESSURE EUROPE AGAIN (0725 GMT)

Pan European STOXX 600 index is under pressure in early deals hitting the April 1

lows touched yesterday as investors continue to fret about escalating tensions between China and

the U.S. and the threat of more tariffs on Chinese imports as the world's top two economies

embark on last-ditch talks to salvage trade spat.

The insurance index is the worst performing sector, down 0.8 percent, dragged lower

by Munich Re which is down nearly 2 percent after reporting a drop in net profits due to higher

claims.

Star performer is Germany's DAX, up 0.2 percent and outperforming its peers, as Siemens

leads the charge higher after better-than-expected results and announcing plans to spin off its

struggling gas and power business followed by Wirecard which is up 2.6 percent after its

results.

Top three fallers on the STOXX 600 - Lufthansa, Siltronic and Hochtief - are all ex-div.

(Josephine Mason)

*****

EUROPEAN FUTURES SIGNAL SUBDUED OPEN (0632 GMT)

European futures are indicating a subdued open this morning after the pan-European STOXX 600

hit more than one-month lows yesterday as investors continue to fret about renewed tensions

between China and the United States over their prolonged trade spat as the world's top economies

embark on last-ditch talks to salvage a deal.

China's trade data for April was a bit of mixed bag with higher imports bolster some

confidence about domestic demand, although falling exports may stir concerns about U.S. trade

deficit.

In data closer to home, German industrial output rose unexpectedly in March, offering a

glimmer of hope for Europe's biggest economy.

There's plenty of earnings and dealmaking to keep investors occupied as well.

Siemens may steal the show after saying it will spin off its gas and power business, which

has dragged on the engineering firm's performance with the rise of renewable power, as the

German industrial giant announced better-than-expected Q2 profit from its industrial business.

Its shares are up 2.4 percent in early Frankfurt trade.

Munich Re has reported a drop in net profits due to higher claims, sending its shares down 2

percent in early trade, while Italy's biggest insurer Generali says it is looking at small and

medium-sized insurance companies in Europe to strengthen its presence in the region.

Elsewhere in financial services, Commerzbank has reported a 54 percent drop in Q1 net profit

blaming a higher tax burden, but the result was better than expected and the bank forecast

higher underlying revenues for 2019.

Another big mover in early trade is Wirecard which is up 2.2 percent after raising its 2019

outlook, as the German payments company shook off allegations of fraud and false accounting to

post a 40.7 percent increase in core profits in the first quarter.

Imperial Brands may get a lift after standing by its FY forecast and delivering higher

half-year results. Supermarket operator Ahold Delhaize said higher Q1 net income was lifted by

upbeat growth in online sales and the Netherlands, but reiterated 2019 margins will be slightly

lower than last year.

After better than expected results from U.S. chip equipment maker Qorvo overnight,

semiconductors will remain in focus amid a slew of recent results. Underscoring industry

concerns about sluggish global demand, Toyota Motor has forecast lower growth in operating

profit for the current year on an expected drop in revenue and weaker vehicle sales in Japan and

North America.

Here's the early harvest of headlines:

Siemens spins off struggling gas and power in smart digital shift

Siemens posts stronger than expected industrial profit

Mortgage litigation claims could hit Spanish bank results - Bank of Spain

Commerzbank Q1 net profit falls on higher tax burden

Scandal-hit Steinhoff posts $4 bln operating loss for fiscal 2017

Ahold Q1 earnings rise, roughly in line with estimates

Deutsche Bank to ISS: "We have improved our risk system"

Ex-Danske CEO Borgen charged over money laundering case -report

Generali targeting European small and medium insurers

German prosecutors aim to fine UBS over alleged help in client tax evasion

Osram posts 56 pct drop in EBITDA in Q2, cites challenging environment

Wirecard lifts 2019 guidance after strong Q1

Munich Re Q1 net profit down 23 percent on higher claims

Here's your snapshot:

(Josephine Mason)

*****

EUROPE ON THE BACKFOOT AGAIN (0518 GMT)

With April's gains wiped off the STOXX 600 in just four days of trading this month,

worries about the tense U.S.-China trade talks and the U.S. threat of more tariffs on Chinese

imports are expected to inflict more pressure on European stocks this morning.

Asia markets have tracked losses on Wall Street overnight, falling back sharply as investors

digest China's latest trade data for April, which was a bit of a mixed bag.

Financial spreadbetters IG expect London's FTSE to open 9 points lower at 7,251, Frankfurt's

DAX to open 6 points lower at 12,087, and Paris' CAC to open 3 points lower at 5,392.

(Josephine Mason)

*****

(Reporting by Danilo Masoni, Helen Reid, Josephine Mason and Thyagaraju Adinarayan)