LIVE MARKETS-Closing snapshot: STOXX 600 ends week near 4-month highs

* European shares end slightly higher

* Earnings updates drive top movers

* German business morale down for 6th straight month - Ifo

* Wall St opens higher, Kraft Heinz plunges

Feb 22 - Welcome to the home for real-time coverage of European equity markets brought to

you by Reuters stocks reporters and anchored today by Helen Reid. Reach her on Messenger to

share your thoughts on market moves: helen.reid.thomsonreuters.com@reuters.net

CLOSING SNAPSHOT: STOXX 600 ENDS WEEK NEAR 4-MONTH HIGHS (1635 GMT)

European shares rose slightly today, ending higher for the second week running, as signs of

progress in trade talks between the United States and China helped propped up equity markets,

while earning updates including from France's Sopra Steria (+16%) and Sweden's Elekta

(-13%) drove big price swings.

The STOXX 600 was up 0.3 percent at the provisional close, staying just below its

highest level since Oct 10 it hit earlier in the session.

Here's your closing snapshot:

(Danilo Masoni)

*****

BIG TELCO WEEK: NOT MUCH TO CHEER ABOUT (1516 GMT)

If you hadn't noticed, this week was a big one for earnings updates from the telco world.

Just yesterday, 50 percent of the sector's market cap reported - one of the biggest telco

results days in nearly 20 years, according to Credit Suisse analyst Jakob Bluestone.

So, have these updates changed the picture for the unloved sector, which has been a serial

underperformer on the market over the past few years?

Bluestone's takeaways (see below) don't appear to suggest that:

1. Sector earnings slightly disappointed

2. EBITDA guidance generally as expected but competition was a bigger drag than expected

3. Dividend risks persist

4. German auction risk main near term sector overhang

5. Capex not accelerating

6. German mobile slowdown mostly driven by roaming.

7. France competition bigger drag than expected

8. Telefonica is the commercial winner in Spain

9. Italy mobile is still under heavy pressure

10. Digitisation does not appear to be doing much on net basis

In the snapshot you can see how telecoms have lagged the STOXX over the past three years, as

they suffered heavier earnings downgrades.

And here's our wrapup of the telecoms results:

(Danilo Masoni)

*****

NOTHING BUT "FLAT & SKINNY" RETURNS AHEAD (1340 GMT)

It's time to bid your good-byes to the strong rally that's lifted markets in 2019 so far. At

least according to Goldman Sachs strategists, who reckon the rest of this year holds nothing but

"flat and skinny" returns in store.

After markets overdid it a little at the end of last year, pricing in way more bad economic

news than necessary, according to GS and other analysts, the 2019 rally has taken stocks back to

more normal levels.

"The gap between equity markets and the macro data has closed," they write.

What's more, the 2019 recovery has been far stronger than the usual bounce, as you can see

below.

"Following the rally, our 12-month price target implies a 1 percent return in Europe,

supported by low single digit EPS growth," they write.

That leaves the direction of travel unclear - and perhaps goes some way to explaining BAML's

Bull & Bear indicator at 4.9 today, firmly in neutral mode as investors await the next catalyst.

(Helen Reid)

*****

ITALY'S ESCAPE ACT? (1228 GMT)

Italy, technically in a recession, should escape a ratings downgrade from Fitch which

publishes its review on the sovereign, rated BBB with a negative outlook, later in the day.

A budget compromise reached with the EU late last year has lifted confidence, bringing

relief to government bonds and battered banking stocks. That should be

enough for Italy to avoid a ratings downgrade today, says Aberdeen Standard Investments

portfolio manager Ross Hutchison.

At the same time, dire economic data only highlights that the growth forecasts the

government based its budget deficit estimates on last year were way too optimistic. And that

means weaker finances and a still uncertain ratings outlook ahead.

A model run by Goldman Sachs suggests just a modest rise in the probability that the

creditworthiness of Italian bonds could be lowered at upcoming rating reviews, but the bank adds

that even a modest increase in the probability of a downgrade should not be underestimated given

the impact ratings decisions can have on investment flows.

Any relief in Italian equity and bond markets following the Fitch Review may well prove

short lived.

(Dhara Ranasinghe)

*****

M&A: EUROPE HAS SOME CATCHING UP TO DO (1140 GMT)

Dealmaking has been on fire so far this year globally: cumulative M&A volumes have hit their

highest level since 2007 year-to-date.

But Europe's been a laggard with M&A volumes tracking at their lowest levels in eight years.

Part of the reason, Morgan Stanley strategists say, is a relative lack of cheap stocks for

acquirers to snap up.

"Europe often looks cheap to an asset allocator, but frustratingly expensive to a

stock-picker," Morgan Stanley's Matthew Garman and team write.

At the index level Europe looks cheap against its history, but the median stock is

relatively pricey: only 50 percent of European stocks trade cheap to their 10-year median

currently, slightly below the U.S. and well behind EM and Japan, according to their analysis.

Of course, these deal numbers only look at the seven weeks since the start of the year, so

it's not wise to extrapolate too much.

It may be the case, as the old fable has it, that "slow and steady wins the race" in the

end, but European M&A sure has some catching up to do.

(Helen Reid)

*****

EUROPEAN EARNINGS SO FAR: DOWN 1 PERCENT (0942 GMT)

We're more than halfway through the reporting season (over 65% of market cap in Europe has

reported results) and unsurprisingly the picture that's emerging is rather poor, as economic

growth continues to slow down and weigh on corporate performance.

Deutsche Bank says European earnings growth has fallen to -1% for Q4 so far, the lowest

since Q2 2016 and down from 8% for the full Q3 earnings season, even though it should pick up a

bit towards the end of the season. For Q1 expectations point to zero growth.

Here are other key takeaways from strategists at the German bank:

* Consensus expects EPS growth for the Q4 earnings season to end up mildly positive at 1%

* Expectations for Q1 EPS growth have been marked down from 6% just before the start of

reporting

to just above 0% currently

* Financials, industrials and consumer discretionary all major drags on earnings. So far,

utilities, energy and tech have seen strongly positive EPS growth

* UK earnings growth remains strong while German growth falls sharply. Both Italy and Spain

also

have seen solid growth

(Danilo Masoni)

*****

OPENING SNAPSHOT: STOXX FLAT, EARNINGS DRIVE BIG PRICE MOVES (0824 GMT)

European shares are off to a muted start today with the STOXX 600 trading little changed in

early deals and hiding much bigger moves at the stock level with earnings updates driving once

again the top movers on the pan-European index.

France's Sopra Steria, up 10 percent, is boosted after it reported its full year

results, while profit numbers at Sweden's Elekta are behind expectations, sending its

shares down more than 9 percent.

Earnings updates are also behind the moves of ASM International, up 6 percent,

Valeo, up 3.4 percent, ISS, up 3 percent, while Eutelsat is down 4

percent on a share placement.

Here's your snapshot:

(Danilo Masoni)

*****

WHAT'S ON THE RADAR FOR THE OPEN: DAIRY CREST, PROVIDENT, ELEKTA (0747 GMT)

European futures are inching lower on Friday as weak data from the U.S. dampened investors’

risk appetite with no concrete agreements yet emerging from crucial trade talks between the

world’s two biggest economies.

Results from car parts maker Valeo come amid serious concerns investors about the autos

sector battling slowing car demand, more stringent EU emissions regulations, and the threat of

tariffs on European car imports to the U.S.

Valeo said 2018 profit fell in a “challenging year”, but said 2019 sales will outperform

auto production by a wider margin. Its shares are indicated down 2 percent

Dealmaking is livening up the UK market: subprime lender Non-Standard Finance made an offer

for its larger rival Provident Financial, and Canadian dairy firm Saputo announced it would

acquire Dairy Crest for about $1.27 billion.

Dairy Crest is expected to jump 10 percent on the deal, priced at 620 pence per share – a

premium of about 11.7 percent to Thursday’s close.

Provident Financial is seen rising 1-2 percent after the “reverse takeover” from

Non-Standard Finance, traders said.

In weak results, Swedish radiation therapy equipment maker Elekta is seen falling 3 percent

or more, according to traders, after it cut its full-year margin forecast and reported earnings

below market expectations.

Education company Pearson said it expected company-wide sales to stabilise this year before

growing again in 2020 and beyond, as it reported 2018 profits in line with forecasts. Its shares

are seen falling around 1 percent.

(Helen Reid)

*****

FUTURES INCH LOWER AS UK RESULTS, DEALMAKING ANNOUNCED (0721 GMT)

Futures are dipping around 0.1 percent apart from the FTSE 100 which is managing a slight

gain.

In more results and company news, dealmaking is back on the scene: subprime lender

Non-Standard Finance has made an offer for the ailing Provident Financial, and Canadian dairy

product firm has announced a recommended cash acquisition of Dairy Crest.

Education company Pearson said it expected company-wide sales to stabilise this year before

growing again in 2020 and beyond, as it reported 2018 profits in line with forecasts.

UK's Merlin sells Australian ski resorts for 95 mln stg

Education group Pearson says will grow again in 2020

Subprime lender Non-Standard Finance offers to buy rival Provident

Britain's Metro, Starling, ClearBank win RBS competition funding

(Helen Reid)

*****

RESULTS TO WATCH: VALEO, SIKA, TELECOM ITALIA (0651 GMT)

There's another slew of results coming in this morning with, among the most interesting, car

parts maker Valeo which said 2018 profit fell but that 2019 sales would outperform auto

production by a wider margin.

Swiss construction chemicals maker Sika reported full-year profit that beat expectations

partly thanks to new factory openings and takeovers.

Here are the headlines so far:

Valeo sees new contracts lifting sales after weak 2018

Sika full-year profit beats on new factory openings

Telecom Italia to grow core profits from 2020, to explore all options on network

Edenred 2018 EBIT rises; confident of strong growth in 2019

Elekta Q3 core profit lags forecast

Puma goes up-market with joint collection with Porsche

(Helen Reid)

*****

WEAK U.S. DATA, FALLING OIL PRICES TO WEIGH ON EUROPEAN SHARES (0627 GMT)

European shares are expected to slide this morning after worrying data out of the U.S. put

the global economic slowdown front and centre of investors' minds once more.

Shares in Asia slipped overnight as a deteriorating global economic outlook outweighed

further signs of progress in trade talks between China and the United States.

New orders for key U.S.-made capital goods unexpectedly fell in December due to declining

demand for machinery and primary metals, and factory activity in the mid-Atlantic region

contracted for the first time since May 2016.

Oil prices also fell after the U.S. reported its crude output hit a record 12 million

barrels per day.

Meanwhile on the trade front, top U.S. and Chinese trade negotiators are haggling over

details of a set of agreements aimed at ending their trade war. Trump will meet with Chinese

Vice Premier Liu He today, the White House said.

"As we move into the final stretch of the second round of US-China trade talks, markets are

reaching fever-pitch," writes RaboBank's senior Asia-Pacific strategist, Michael Every.

"If they weren’t already nervous at the prospect of things going wrong the slew of weak data

yesterday from the US and re: global manufacturing were a stark reminder that things are already

less than rosy."

According to CMC Markets, the FTSE 100 is expected to open 10 points higher at 7,177, the

DAX is expected to open 10 points lower at 11,413, and the CAC 40 is expected to open 8 points

lower at 5,188.

(Helen Reid)

*****

(Reporting by Helen Reid, Danilo Masoni, Julien Ponthus)