LIVE MARKETS-Closing snapshot: heatwave spreads across Europe on eve of ECB

* European shares rise in choppy trade, Euro STOXX at July 4 high * Trade and rate cut hopes fuel gains * Euro zone business growth stalls in July, outlook darkens * Earnings in focus in Europe and U.S. ahead of ECB meeting * Deutsche Bank posts 3.15 bln euro Q2 loss, shares fall * Chips rally after ASMI, Texas Instruments results 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 CLOSING SNAPSHOT: HEATWAVE SPREADS ACROSS EUROPE ON EVE OF ECB (1539 GMT) Basking in the heatwave that's currently scorching Europe, investors are also hoping they'll be enjoying the warm glow from Mario Draghi's gifts to the market this time tomorrow. Ahead of tomorrow's highly anticipated ECB policy meeting, European stocks have closed near their highs for the day due to a combination of central bank stimulus hopes, optimism about the U.S.-China trade talks and earnings. "Everyone is warming up, readying to read central banks' comments," says SocGen's head of equity strategy Alain Bokobza. "The market will be listening extremely carefully for details on the asset buying programme and rate guidance." With the markets aggressively pricing in a broader loosening of policy from the ECB, Japan and the Fed, brace for volatility if the central banks disappoint, he cautions. Investors got a bit of a taste of that today. The euro-zone stocks index almost breached the July 4 high in afternoon trade, rising as much as 0.3% having fallen most of the day. The index closed up 0.2%. London's FTSE 100 was a laggard, dropping 0.6% as losses in its heavyweight mining stocks after a big drop in the iron ore price in China overnight offset a rally in ITV and Informa following their results. About 60 companies will be releasing earnings tomorrow - BASF, VW, AstraZeneca, Diageo among them -, but really eyes will be firmly on the ECB's plans, with investors expecting a signal from the bank in its rates outlook that it has potential to cut interest rates and will be looking for details on fresh QE. (Josephine Mason) ***** SOYBEANS AND STIMULUS BUOY EUROPE (1434 GMT) It looks like European shares are reluctant to give in to selling pressure and even though a slew of macro data on both sides of the Atlantic has added to worries over the global economy, hitting the heavyweight banking sector, main benchmarks are now trading near session highs. There doesn't seem to be a clear trigger but the poor macro is feeding into expectations that central banks in Europe and the U.S. will cut interest rate as signs of progress in Sino-US trade talks grow. "The trade hopes are building ahead of Monday's US-China meeting. China confirmed plans to buy agri products and the meeting has been confirmed by both sides. CNY is starting to rally which is confirmation by FX markets that they're more comfortable," says a trader. "Meanwhile crappy data keeps the stimulus hopes alive," he adds. Markets.com analyst Neil Wilson also sees trade developments as positive. "U.S. trade delegation is going to China next week. Positive news and pro-risk. And we have perhaps a meaningful development as China approves tariff-free US soybeans purchases as goodwill. This certainly is a positive," he says. In an apparent goodwill gesture, Chinese officials briefed private importers last Friday on a plan to boost purchases of soybeans, according to three people familiar with the matter. Euro zone shares have just hit their highest level since July 4, up 0.3% - having fallen as much as 0.2% earlier in the session. (Josephine Mason and Danilo Masoni) ***** BREXIT: MORE THAN A VERY BRITISH PROBLEM (1205 GMT) Think Brexit is a very British problem that's mainly roiling sterling and some domestically focused midcap stocks? Think again. Germany's heavy reliance on the automobile sector along with the country's poor economic health in general leave its stocks more vulnerable to a big sell-off than UK domestic indices if Britain crashes out of the European Union without a deal, a stress-test for a cliff-edge Brexit by analytics firm Axioma shows. Germany could be hit from both tariffs on car exports to the UK as well as the detrimental effect on the cross-border flows of components and parts, which the auto industry has become so reliant on. Axioma's projections, based on relationships during the run-up to the 2016 referendum, indicate that Frankfurt's blue-chip DAX 30 index would 11.7% decline over a three-month period after a no-deal Brexit. That compares with a fall of 9.5% in the blue chip FTSE 100 and 8.5% for the FTSE 250. That rather undermines the idea that the exporter-heavy FTSE 100 would fare better than the domestically focused midcaps. That's based on an assumption that sterling would fall to $1.1, which would be parity with the euro over a three-month horizon after a no-deal Brexit, a 12% drop from current levels. (The GBP/USD rate declined 18% in the three months following the original Brexit vote.) Below are charts showing how the indices would fall to based on today's levels. Should newly elected PM Boris Johnson defy the odds and strike a deal with Brussels and get it approved in Parliament, the analysis is more tricky. The pound could gradually rally to $1.43, a high reached at the end of 2017, but over a three-month scenario stock market returns are harder to predict, Axioma finds. That's because a large part of the performance would likely be driven by factors outside the UK. There could be a slightly negative effect from the currency appreciation, but the company's model suggests there would actually be a marginal underperformance compared with U.S. large-cap stocks of around 1% based on recent correlations, it says. (Josephine Mason) ***** ENJOY YOUR SUMMER HOLIDAY, BUT WATCH OUT FOR 2020 (1204 GMT) Consensus forecasts for Q2 earnings keep being reined in and the profit warnings from the chemicals and autos sector keep rolling in in Europe and the region is expected to fall into an earnings recession, according to the most recent consensus. But U.S. consensus is looking a little rosier as we head towards the busiest week for reporting - with 166 U.S. companies scheduled to report numbers next week - just as the Federal Reserve is due to announce its latest policy moves, with an interest rate cut on the cards. But SocGen's equity strategy team led by Alain Bokobza reckons investors should go on holiday with ease of mind that the bad news on Q2 U.S. results are well known and unlikely to derail the stock market rally. So far, the downgrades are following a usual pattern, largely because expectations are always too optimistic. This year the downgrade path is much steeper than the average, but central banks' dovish positioning and U.S. share buybacks are still supportive for now. Looking further ahead though, investors should take a hard look at 2020 expectations. "They are still much too optimistic, highlighting some risks of downgrades and potentially playing the role of a drag on S&P 500 price action," the team cautions. "The moment consensus begins to downgrade 2020 EPS figures will signal caution for us, as this was the case back in September 2018," it says in a note referring to the massive rout across global stock markets in Q4 triggered by worries about macroeconomic data and slowing corporate growth after a stellar H1. The chart below shows consensus earnings forecasts for U.S. and European companies, according to data from I/B/E/S Refinitiv. Consensus for Q1 2020 is as high as 16.3% for Europe and 9.5% for the United States. (Josephine Mason) ***** WILL DRAGHI PRESS ON THE ACCELERATOR? (0944 GMT) Euro-zone PMI data have underscored weakness in the region's economy with a German manufacturing recession deepening further this month just before tomorrow's ECB meeting where the central bank is likely to signal a dovish policy turn. Consensus is for the ECB to cut its deposit rate in September and while today's data may not be enough for immediate action it will surely give more ammunition to the doves. "PMIs are a gift to Draghi who will have one more reason to press on the accelerator," says Marco Vailati, head of research and investment at Cassa Lombard in Milan. "Most likely still only with words," he adds. Vailati says he still expects a rate cut along with a relaunch of QE in September when the ECB is due to update its macro forecasts. ING is less certain about timing of possible action. "The PMI paints a picture of an economy that is flirting more with the downside than with swift recovery. More ECB stimulus seems to be a done deal, but the timing remains an exciting question," writes ING senior economist Bert Colijn. "If the ECB has yet to decide whether it is already tomorrow or September when it will act, this PMI has given the doves on the governing council even more ammunition," he adds. Euro-zone banks hit their day low after the data, the latest news to send shudders through the sector struggling with lower-for-longer rates while Deutsche Bank nurses a massive $3.5 billion loss in the second quarter. Eurozone shares have also taken a turn lower after the data, likely suggesting no major change in expectations about the easing path of the ECB, which had contributed to support shares over the past few days. Bond yields fell further. (Danilo Masoni) ***** STOXX STEADY, DB DOWN, ASMI ADDS SHINE TO CHIPS, ITV TOP GAINER (0732 GMT) The pan-European STOXX 600 benchmark is managing to hold near the over two-week highs hit in the previous session, trading just about flat as investors digest a deluge of earnings. Banks have pulled back after strong gains yesterday with Deutsche Bank down 2.5% after it posted a larger-than-expected loss of 3.15 billion euros ($3.5 billion) in the second quarter due to major restructuring costs. Chips instead continue to shine as Dutch semiconductor supplier ASM International reported a 25% increase in Q2 revenue, beating expectations, adding to a string of good earnings news in the sector. Its shares are up 5.3% at record highs. On Tuesday Apple supplier AMS delivered a strong update and Texas Instruments beat Q2 earnings and sales estimates overnight. Among the top gainers on the STOXX is ITV, up 7% after Britain's biggest free-to-air commercial broadcaster said a strong contribution to online revenue from reality show "Love Island" helped limit the decline in total ad revenue to 5% in the first half of the year. A disappointing update due to damage from the U.S.-China trade war however has hit specialty chemicals maker Croda, which fell 5%, and luxury carmaker Aston Martin has lost almost a quarter of its value in early deals after cutting its FY forecasts and warning about persistent weakness in the UK and Europe. Worries about the health of corporate Europe are keeping a lid on gains - data from I/B/E/S Refinitiv shows STOXX 600-listed companies are expected to report a 0.5% drop in Q2 earnings, a reversal from 0.2% growth estimated a week ago. That would also mark a company recession after a drop in Q1. Later in the day Wall Street heavyweights may steal the show in earnings with results due from companies of thecaliber of Facebook, Caterpillar, and Boeing. Here's your opening snapshot: (Danilo Masoni) ****** EUROPE TO STEADY NEAR 2-WEEK HIGH AS EARNINGS ROLL IN (0658 GMT) European shares are expected to open flat to slightly lower after hitting over two-week highs in the previous session, in another heavy day for earnings updates and with the immediate focus turning to the release of PMI data before tomorrow's ECB meeting where the central bank is expected to prepare the ground for a rate cut in September. Futures on main country benchmarks are all lower except for Spain's IBEX which are flat. After strong gains in the previous session on the back of solid updates from Santander and UBS, banks are set to be weighed down after Deutsche Bank posted a larger-than-expected loss of 3.15 billion euros ($3.5 billion) in the second quarter due to major restructuring costs. DB shares are down 4.7% in early Frankfurt trade. In autos, Daimler shares are up 0.9% in early Frankfurt trade as the luxury car maker said it would intensify cost cuts after legal risks for diesel-related issues and the cost of replacing Takata airbags triggered a 1.56 billion euros loss before interest and taxes in Q2. Earlier this month, Daimler pre-released earnings in what amounted to its fourth profit warning in 13 months. In France, PSA Group delivered a sharp increase in H1 profit, as new models and the integration of Opel-Vauxhall more than made up for weaker emerging-market sales. Traders see PSA shares rising 1-3% at the open. Aston Martin has however cut its 2019 forecasts on UK, Europe weakness and Japan's Nissan is planning job cuts of more than 10,000, the latest bad news from the troubled sector. Following a strong update from Apple supplier AMS on Tuesday, chipmakers could find further support after Texas Instruments Q2 earnings and sales beat estimates, soothing demand jitters and sending its shares up sharply. In Europe, Dutch semiconductor supplier ASM International reported a 25% increase in Q2 revenue, beating expectations, driven by its logic chips and fabrication business. Fresh signs of progress in Sino-US trade talks are also helping chips and other trade exposed sectors. Shares in Covestro are rising 1.8% in early trade after the chemicals maker confirmed its FY core profit outlook, saying it met its Q2 targets despite challenging global economic conditions. A solid update also from paints and coatings maker Akzo Nobel posted a better-than-expected 36% jump in Q2 core profit, as higher prices and cost savings offset raw material inflation. In other encouraging earnings news, Swiss drug ingredients maker Lonza Group confirmed FY targets, lifting its shares 1.1% premarket, even though H1 profit plunged as it took losses linked to the sale of its water business and as difficulties at its specialty ingredients business continued. Telefonica Deutschland also rose in early Frankfurt trade after results. In dealmaking and share moves, Hugo Boss shares are down 2.8& in early trade after a share placement from shareholder Xinglee, while Metro is down 2.7% in premarket after it recommended its shareholders not to accept a takeover offer by EP Global Commerce. Other stock movers: Clariant CEO exits after 10 months amid key talks with SABIC Love Island delivers for ITV in tough ad market UK chemicals firm Croda unit hit by U.S.-China trade war Spain's Iberdrola boosts profit forecast as H1 earnings rise T-Mobile parent Deutsche Telekom schedules meeting as Sprint deal nears approval - report Tullow Oil restores dividends with $33 mln payout KPN core profits gain despite network outage, CEO exit Skanska Q2 operating profit above forecast (Danilo Masoni) ***** HEADLINES ROUNDUP: EARNINGS, EARNINGS, EARNINGS (0554 GMT) Turning to the corporate front, it's all about earnings updates this morning. Deutsche Bank posted a Q2 loss of 3.15 billion euros as a result of costs for a major restructuring, while Daimler said it would intensify cost cuts after legal risks for diesel-related helped trigger a 1.56 billion euros loss before interest and taxes in Q2. The impact of these updates may partly be price in already as DB had already indicated the magnitude of its loss when it announced its restrucuring earlier this month, while Daimler pre-released earnings earlier this month in what amounted to its fourth profit warning in 13 months. In more upbeat releases, paints and coatings maker Akzo Nobel posted a better-than-expected 36% jump in Q2 core profit, as higher prices and cost savings offset raw material inflation, while chemicals maker Covestro confirmed its FY core profit outlook, saying it met its Q2 targets despite challenging global economic conditions, competitive pressures and weakness in the automotive industry. In autos, PSA Group delivered a sharp increase in first-half profit, as new models and the integration of Opel-Vauxhall more than made up for weaker emerging-market sales. Here are other headlines that may move markets this morning: Lonza H1 profit plunges, says on track to hit full-year goals KPN core profits gain despite network outage, CEO exit Sulzer raises full-year sales outlook after seeing no signs of slowdown EFG reports increase in assets under management in H1 Skanska Q2 operating profit above forecast Clariant CEO exits after less than a year on the job TIM to announce towers deal, 5G partnership with Vodafone on July 26 - source (Danilo Masoni) ***** EUROPE SEEN HIGHER AHEAD OF PMI DATA (0530 GMT) European shares are set for a stronger open in another heavy day for earnings updates and with the immediate focus turning to the release of PMI data later on ahead of tomorrow's ECB meeting where the central bank is expected to prepare the ground for a rate cut in September. Following slight gains in Asia overnight on hints of progress in the Sino-U.S. trade saga, spreadbetters at IG expect London's FTSE to open 8 points higher at 7,565, Frankfurt's DAX to open 46 points up at 12,537, and Paris' CAC to open 12 points higher at 5,630. A disappointment on the PMI front, however, could erode possible gains. "Today's flash manufacturing and services PMIs from France and Germany could prompt further weakness this morning if the weakness seen in the manufacturing numbers in recent months starts to bleed into the services sector," says Michael Hewson, analyst CMC Markets. In corporate news, Deutsche Bank posted a Q2 loss of 3.15 billion euros as a result of costs for a major restructuring, while Daimler said it would intensify cost cuts after legal risks for diesel-related helped trigger a 1.56 billion euros loss before interest and taxes in Q2. Later in the day the focus will shift to earnings from Wall Street companies of the caliber of Facebook, Caterpillar, and Boeing. (Danilo Masoni) ***** ($1 = 0.8968 euros) ($1 = 0.8974 euros) (Reporting by Danilo Masoni, Josephine Mason and Thyagaraju Adinarayan)