LIVE MARKETS-Closing snapshot: Red is the new black

* European shares off 21-month highs they hit yesterday * STOXX 600 down 0.2%, DAX down 0.02% * British stocks, pound lower as election nears * S&P 500 closed at record high * Earnings in focus: Stora Enso, Fresenius, BP 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: RED IS THE NEW BLACK (1720 GMT) After flying high yesterday, European bourses closed down today as weak earnings and the continuous uncertainty surrounding the UK election dampened the optimism fuelled by Monday's progress on the U.S.-China trade front. Investors avoided big bets as Boris Johnson continued to push for a pre-Christmas election which he hopes will land him a majority and the chance to finally get his Brexit deal through parliament. The pan-European index was down 0.2%, led by Ørsted, which cut IRR of seven offshore wind projects. Shares in the Danish company were down 7.4%. The FTSE 100 was down 0.3% pushed down by BP's shares, which dropped almost 4% after the FTSE heavyweight reported a 40% fall in profits. Smurfit Kappa shares also fell following weak results.. Here is a snapshot of European bourses at the close. (Joice Alves) ***** PUTTING THE DATA WHERE THE MONEY IS (1203 GMT) It hardly adds up, does it? There's a growing worry transpiring from today's batch of market research that the current data doesn't justify the record highs hit on Wall Street. Same goes for Europe Inc, cruising on levels not seen since the good old days of the "global synchronised growth" narrative (RIP btw). Many analysts are scratching their heads at the 5 percent jump experienced since the beginning of October because, anyway you look at it, Q3s profits are lower than they were a year ago. "The earnings season confirms the expected downturn in the profits cycle", sums up Axel Botte, a strategist at Ostrum Asset Management. So, is the faith in a pick-up further down the road justified? DB's Reid notes that while a bunch of factors (EU/UK Brexit deal, Fed's dovish stance and U.S./China 'phase one' trade deal) helped kickstart the three week rally, there's still something missing for the picture. "We certainly need the data to catch up now to justify the strength", he wrote in his "Early Morning Reid". Stephen Innes at Axi trader, believes that "given the steady diet of 'risk-on' narrative this week, the deluge of economic data will be crucial to hold sentiment in check". "I suspect trade and risk sentiment consolidates here until the market sees if data is bottoming and comes to grips with Fed forward guidance". UBS AM takes comfort in the fact that "equity bull markets rarely end in the absence of a recession occurring", which is arguably not an immediate threat, even if recent economic data has been disappointing and that "risks for the economy are skewed to the downside". As a matter of fact, UBS argues, the U.S. business cycle may well be on a late stage but that late stage may very well last a while. Below and circled in yellow is the current slow patch of U.S. earnings. (Julien Ponthus) ***** EUROPEAN TELECOMS: ENTER THE ACTIVIST SHAREHOLDER! (1028 GMT) Face it telcos aficionados, there's just nothing much to look forward to in your sector. Here's a sobering note from Moody's rubbing it in by making the case that the two possible catalysts to prop up revenues in European telecoms, consolidation and 5G, are "absent". Yes, the new Commission in Brussels is not expected to loosen competition rules and "the introduction of 5G seems unlikely to boost revenue growth over the next 12-18 months". So, no M&A, no 5G, but that doesn't mean that there won't be any action in the defensive sector that critics often dare call boring. Indeed, the perceived strategic impasse and depressed share price (telcos, banks and energy groups are 2019 laggards) mean that barbarians could soon be queuing up at the gate. "The low level of share prices in the industry suggests there is potential for activist investors to enter the sector and seek to change financial policies and strategies", Moody's analysts believe. "This creates additional pressure on boards to tilt the balance toward shareholder remuneration and away from creditor protection to boost share prices", they add, making clear that from their point of view - debt holders - this is not a good thing. "We perceive this as an increased financial risk which may influence strategies to the detriment of creditors' interests", Moody's concludes. Anyhow, all of this will be no surprise for loyal Live Markets readers who have had their dose of warnings that "Without M&A the sector sucks" in the past. Here are a few: LIVE MARKETS-"Without M&A, the sector sucks"-Part 10 (02-Aug-2018) LIVE MARKETS-Another case of "Without M&A, the sector sucks" (26-Nov-2018) LIVE MARKETS-"Without M&A, the sector sucks" - new series (14-Mar-2019) As a last argument, here's Moody's chart showing how anaemic revenue growth is in the sector: (Julien Ponthus) ***** CURB YOUR ENTHUSIASM! MARKETS SIGH AT UK DEC ELECTIONS (0930 GMT) Politically, things seem to be speeding up towards a Brexit general election on December 11 but that's clearly not to the taste of investors who arguably have had their yearly dose of uncertainty so far in 2019. While both British blue chips and midcaps hit session lows after the BBC reported a possible breakthrough between the government and opposition parties, sterling is also stuck in a downward trend, down 0.33% currently. There was always however the expectation that the announcement of an election would trigger a short term dip in all things British and curb the recent enthusiasm about a no-deal Brexit being averted for now. Fair to say that the Corbyn risk premium is still fairly low given the fact that Labour is about and roughly 10 points behind the Tories. BP's disappointing earnings are doing little to ease election jitters, neither did fresh data about British house prices. Still the resilience of Britain's real estate in the face of Brexit is somewhat comforting. Nationwide's chief economist Robert Gardner said Britain's strong labour market - the silver lining of the economy before Brexit - and low borrowing costs were offsetting the drag from the uncertain economic outlook. There's even a potential play if Brexit ends up favourably, NN Investment Partners argued this morning. "We see value in UK homebuilders, where policy support, low interest rates, stable margins and strong cash flows underpin very attractive valuations and dividend yields", Maarten Geerdink, head of European equities wrote. "We would expect positive returns from these names in all but the hardest of Brexit outcomes", he added. At AJ Bell, Russ Mould noted again that "housebuilders, estate agents and banks are seen as the key sectors whose share prices could rally once Brexit uncertainty is removed". (Julien Ponthus) ***** OPENING SNAPSHOT: TAKING A BREAK (0831 GMT) After progressing to 21 month highs, helped by easing trade and Brexit worries and ahead of an expected Fed rate cut this week, it looks that European shares are taking a break - perhaps all the positive news has been priced in for now. The pan-regional STOXX 600 index is down slightly in early deals and all main country benchmarks are also a tad in the red. Across all sectors, there no move worth a mention while earnings updates are fuelling some big swings among individual stocks: Stora Enso is down 9% to the bottom of the STOXX after the Finnish paper firm's Q3 sales and operating profit missed expectations. Other paper stocks are down in sympathy. Fresenius and its Fresenius Medical Care dialysis unit are rising 4.1% and 5.5% respectively after a solid trading update. Among the heavyweights, BP is now down nearly 1% following a positive start on the back of a smaller than expected drop in Q3 profit. BP is the biggest weight to the STOXX among single stocks. Here's your opening snapshot. (Danilo Masoni) ***** FUTURES OFF HIGHS, FOCUS ON EARNINGS (0752 GMT) European shares are set to open little changed after hitting 21-month highs yesterday on optimism over Sino-U.S. trade talks, a soft Brexit and ahead of an expected rate cut in the United States this week. Futures on the Euro STOXX 50, DAX and FTSE 100 are trading flat to down 0.1%. In corporate news, quarterly updates will be the main focus and so far Europe Inc has managed to deliver a modest beat, although the bar had been lowered significantly with the latest Refinitiv IBES indications pointing to a 5.3% drop in Q3 profit, prolonging an earnings recession. Results this morning look mixed. Shares in Stora Enso are seen falling 7-10% after the Finnish paper said geopolitical uncertainties would dampen demand in Q4 following a sharp drop in profit in the three months to September. But shares in Fresenius are up 4% in premarket trade after the German healthcare group slightly exceeded Q3 revenue forecasts, citing strong performance of its infusion drugs unit in emerging markets and growth in home treatment at its separately-listed dialysis business. German dialysis specialist Fresenius Medical Care also beat expectations, sending its shares up 3% in premarket trade. BP's Q3 profit dropped sharply, but still beat expectations, hurt by weaker oil prices, lower production and one-off charges linked to large divestments. Its shares are seen rising around 1-2% at the open. Meanwhile, Beiersdorf is seen opening down 2-3% after the consumer goods firm reported slower sales growth in Q3, citing a "challenging and very competitive market environment", with its adhesives unit dented by a fall in sales to the auto industry. Deutsche Boerse posted a 10% rise in Q3 net profit thanks to increased trading in derivatives markets as well as power and gas markets and the company confirmed its targets for the full year. Traders see the shares falling at the open as core profit missed expectations. Other stock movers: Fashion group SMCP maintains annual outlook as Q3 sales rise; Orange's Q3 sales up 0.8% on strong demand in Africa, Middle-East; MTG eyes U.S. listing, plans strategic review for gaming business; Plus500 quarterly revenue jumps on customer additions; Retail business, acquisitions lift Austrian lender BAWAG's profit; Dental supplier Straumann again raises 2019 outlook after strong Q3; Morphosys ends development of dermatitis treatment, shares fall (Danilo Masoni) **** EUROPE SEEN STAYING ON A HIGH (0641 GMT) After the S&P 500 climbed to a new lifetime high yesterday and Asia shares rose overnight to three-month peaks, Europe too is expected to stay near its recent highs - as hopes of progress in Sino-U.S. trade talks and a soft Brexit keep the mood supported ahead of an expected Fed rate cut later this week. Spreadbetters at IG expect London's FTSE to open 4 points higher at 7,335, Frankfurt's DAX to open 12 points higher at 12,954 and Paris' CAC to open 1 point higher at 5,732. Earnings news is also expected to dominate. In the U.S. there was mixed price moves in the tech sector with shares in Google parent Alphabet's falling after Q3 profit missed analyst estimates as costs continue to rise , while Microsoft shares rose after the company won the Pentagon's $10 bln cloud computing contract. Of course a there are already lots of Q3 updates coming out of Europe this morning that are going to keep investors busy. Among them Fresenius, Straumann and Deutsche Boerse. (Danilo Masoni) ***** (Reporting by Danilo Masoni, Joice Alves, Julien Ponthus and Thyagaraju Adinarayan)