UK Markets closed

LIVE MARKETS-Closing snapshot: keep calm and carry on

* STOXX 600 ends up 0.7 percent

* Wall street higher

* Tech stocks leads gains on trade optimism, Broadcom results

* Investors pile into defensive sectors like telecoms

* Germany's DAX outperforms as investors pin hopes on U.S.-China trade talks

* FTSE 250 rallies in pm trade as sterling gains

* 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


CLOSING SNAPSHOT: KEEP CALM AND CARRY ON (1729)

If you'd been living in a cave this week and took a peak just now at the closing market levels, you'd be forgiven for thinking all was rosy with the world - STOXX 600 and FTSE 100 have just finished their best week in a month.

"UK equity investors have remained reassuringly calm in the face of unprecedented political turmoil," says Ian Williams, economics and strategy research analyst at Peel Hunt, in a note titled 'Crisis, What Crisis?'.

A marked increase in turnover today after activity levels had been broadly inline with long-term averages throughout the tumult of this week suggests things weren't quite as calm ahead of the weekend as they seemed.

STOXX 600 turnover was almost double its 90-day daily average - a similar trend was seen across the major European bourses, data shows.

Don't forget there are still many twists and turns in the Brexit showdown ahead and worrying signs of global economic slowdown.

Brace for another packed calendar of potentially-market moving events - while focus will remain on Brexit, we have Fed and BoE rate decisions next week, which Williams says should both include a continued dovish tone, and some key macro releases: UK labour, inflation, retail sales data as well as euro-zone flash PMIs.

Here's your closing snapshot:



(Josephine Mason)

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A TALE OF TWO PERIPHERIES (1551 GMT)

A divergence in southern European markets, which so often in the past have traded as a bloc, appears to be growing wider still. Ratings decisions after the close of markets on Friday may well add to that picture.

First there's Italy - its economy is in recession and growth forecasts have been slashed by economists in recent months. Commerzbank reckons that Moody's, which rates Italy Baa3 with a stable outlook, could shift that view to negative, raising the risk of a downgrade in the months ahead. Not great news for the country's banks – a big holder of domestic government debt.

And then Portugal - it will be reviewed by S&P Global and may well be poised for an upgrade given its stronger growth prospects, say analysts.

The contrasting fortunes are evident in stocks too: over the past year, the Milan bourse has underperformed the euro-zone index by 5 percent, while Lisbon is off just 0.6 percent.

For sure, the prospect of lower rates for longer and more cheap ECB loans for banks has boosted stock and bond markets across the periphery, but the divergence in southern European markets, which began after Italy's political crisis in May last year, looks set to continue.

Below you can see the diverging fortunes of the two countries' stock and bond markets over the past year:




(Dhara Ranasinghe and Josephine Mason)

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READING THE CHARTS (1345 GMT)

As investors wonder how much longer the global equity rally can last, chartists are pointing to some bullish technical signals on European bourses that may help stocks grind even higher.

The euro-zone STOXXE pierced its 300-DMA and London's FTSE 100 hit its 200-day moving average this morning, the latest sign the market's upward momentum is building.

The first significantly bullish sign for the FTSE 100 was on Jan. 30 when the 20-day MA pierced the 50-day, says Mike van Dulken, head of research at Accendo Markets.

The third, a most significant, would be if the 50-day MA breaches the 200-day MA, with the short-term trend crossing the long-term one and forming a bullish "golden cross" chart.

It may take another couple of weeks of gains for the FTSE to get there and fundamentals from Brexit news to economic data could derail all that, but if it does, it'd be a major breakout from recent ranges and potentially point to another leg higher.



(Josephine Mason)

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CANARY IN THE U.S. EARNINGS MINE (1220 GMT)

While investors shovel money with enthusiasm at U.S. stocks, profit margins are painting a different picture. Analysing profit margins derived from national economic accounts (NIPA), U.S. corporate margins don't look as strong once favourable tax treatments and economic cycles are accounted for, according to Blackrock Investment Institute strategists.

They say that a global earnings recession is very likely in 2019 as U.S. corporate margins have likely peaked. Earnings are a key driver for equity returns over the long term.

Data from U.S. national accounts is a better indicator as profit margins tend to lead benchmark stock index margins, such as those of the S&P 500 and turning points in NIPA margins precede those of the S&P by an average three quarters.


(Saikat Chatterjee)

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IS IT GOOD TO BE PASSIVE? (1141 GMT)

Should one be active or passive? A new report suggests passive investing, on a roll in recent years, will overtake its older, better-established cousin in the United States by 2021.

The report, by Moody's, says its data showed record outflows from U.S. active funds last year: active investment strategies' share of the total declined to 63.3 percent, from 75 percent in 2013.

The share of passive investment on the other hand has risen steadily and is set to exceed 50 percent by 2021, Moody's projects, versus an estimated 36.7 percent last year.




The boom is global. Fundamentally, it's driven by the belief that index-tracking vehicles such as ETFs are more efficient at channelling corporate earnings into investors' pockets as they cut out hefty fees and commissions to fund managers and traders.

But there are other drivers too. For one, there is growing concentration in the active industry as more money migrates to a small pool of superior managers. Second, there's a trend towards even lower-fee passive products -- Fidelity, for instance, has launched a suite of zero-fee ETFs, Moody's notes.

Passive is gaining ground in Europe too: passive funds' assets will rise to 25 percent by 2025, from 14.5 percent at end-2018, Moody's predicts.

Here, the EU's MiFID 2 rules are helping as these provide better visibility into the fees that active funds are charging.

"These changes will likely push retail investors toward cheaper passive funds, including ETFs, just as they become more widely available through investment online platforms," Moody's concludes.

Whether the passive strategy pays off in these turbulent times, with wild intraday swings in indices and stock prices in recent months, remains to be seen.


(Sujata Rao)

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TGIF!... AND NO BREXIT VOTE TODAY! (1131 GMT)

A deal, no deal, a delay - this roughly summarises the chaotic week in the British parliament.

And today, some comfort that the chances of avoiding a no-deal Brexit are rising ... and perhaps a little relief there's no complex Brexit-related vote this evening to contend with.

The market's certainly in a risk-on mood. The relief along with hopes about a U.S.-China trade truce appear to be pervading equities, with the pan-European STOXX 600 up 0.7 percent and the FTSE 100 up 0.8 percent, both likely to finish with their best weekly performance in a month.

Even sterling is taking a breather today after a bumpy ride this week, which saw volatility has hit levels not seen since early January.

Then again, UBS says the currency's resilence this week shows a soft Brexit looks increasingly likely from here.

Still, the exuberance across equities may be a little overdone given the huge amount of uncertainty about the process - PM May heads to Brussels for a summit on Thursday -, slowing economic growth and the fact there hasn't been much more than rhetoric around the U.S.-China trade talks, says deputy chief investment officer Edward Park at asset manager Brooks MacDonald.

He says it's still difficult to get too excited about euro-zone and UK equities given all the headwinds.

"There are still quite a lot of moving parts (to Brexit .......) There will only be limited respite or buying opportunities," he says.

And for any tweeples among our readers: https://twitter.com/i/status/1106479513108656128


(Thyagaraju Adinarayan and Josephine Mason)

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OPENING SNAPSHOT: TECH HELPS EUROPE HIT 5-MONTH HIGHS (0903 GMT)

European shares have managed to breach, by a whisker, Thursday's Oct. 5 high in opening deals, as the appetite for riskier assets spreads from Asia overnight after positive signs over U.S.-China trade talks. Tech stocks, often vulnerable to tension tensions, are the biggest gainer.

Investors don't seem to be tiring of the Brexit news either - London's FTSE 100 is leading the show today, up 0.5 percent, lifted by its heavyweight oil and mining stocks, but even the domestically focused midcaps are rising even as sterling takes a breather after a volatile week.

Wirecard is at the bottom of the STOXX 600 after a Citi downgrade, compounding the German payment company's woes amid a probe of its Asian business, while H&M is down almost 5 percent after its Q1 sales.

Here's your snapshot:



(Josephine Mason)

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ON OUR RADAR: COURT- AND BOARDROOM DRAMAS (0750 GMT)

There's not much in the way of corporate earnings with the results season nearly over.

Better-than-expected results from U.S. chipmaker Broadcom may boost competitors in the euro zone.

H&M, the world's second-biggest fashion retailer, has reported in-line Q1 sales growth, while British pubs group JD Wetherspoon saw a drop in H1 profits as it battles high labour costs.

Otherwise it's court and boardroom drama galore.

VW will be in focus after the U.S. Securities and Exchange Commission filed a civil suit against Volkswagen and its former chief executive Martin Winterkorn over the German automaker's diesel emissions scandal, accusing the company of perpetrating a "massive fraud" on U.S. investors.

UBS shares are seen under pressure after Switzerland's top bank said it is bulking up its litigation provisions to deal with a French court slapped it with a hefty penalty last month.

The news comes a day after Hong Kong's securities regulator banned the bank from leading IPO in the city for a year and hit it with a fine.

Nordic banks will remain in focus after a Swedish TV programme reported that an internal Swedbank report dated last September showed transactions corresponding to 95 billion Swedish crowns between "suspicious" customers in Swedbank and Danske Bank had been done between 2007-2015 in the Baltics.

The shareholder showdown continues at Telecom Italia, with the board giving its backing Chairman Fulvio Conti, who is embroiled in a row with the company's top investor, French media group Vivendi.

Vivendi accused Conti of violating corporate and governance rules by siding with rival investor and activist fund Elliott.


Here are some headlines:


Telecom Italia says board fully backs chairman

Airlines wrestle with calls, cancellations after Boeing MAX fleet grounded

Ethiopian Airlines flight reported trouble soon after takeoff

VW's Scania sees China rebound, braces for Brexit hit to UK orders

German court says RWE was not allowed to cancel Uniper deal

BMW and Daimler seek 7 bln euros savings from shared platforms

Inquiry into Lloyds' handling of HBOS fraud slips to 2020 -source


(Josephine Mason)

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APPETITE FOR RISK (0719 GMT)

Investors appear to be drawing continued strength from the positive noises coming out of the talks between Washington and Beijing to end their protracted dispute over trade and after UK lawmakers voted to delay the country's chaotic (and protracted) exit from the EU.

All the major European stock futures are in positive territory, with the trade-sensitive DAX leading the pack, up 0.2 percent.

How long it can last ahead of the weekend and a crucial European summit for UK PM May next Thursday is yet to be seen.

But for now, there's a risk-on appetite in the air.



(Josephine Mason)

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TRADE, BREXIT OPTIMISM SEEN LIFTING EUROPE (0642 GMT)

European shares are expected to continue their march higher this morning, extending yesterday gains that saw them hit five-month highs, amid continued optimism over U.S.-China trade talks and the UK's chaotic exit from the European Union.

Yesterday, the STOXX 600 got within a whisker of piercing the Oct. 5 high of 379.83 level and is on track for its best week since mid-February.

Financial spreadbetters IG expect London's FTSE to open 15 points higher at 7,200, Frankfurt's DAX to open 19 points higher at 11,607 and Paris' CAC to open 7 points higher at 5,357.


(Josephine Mason)

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