LIVE MARKETS-Closing snapshot: Wall Street drags Europe down

* STOXX 600 falters as earnings flow in

* Heidelbergcement (IOB: 0MG2.IL - news) slides 8 pct after profit outlook cut

* Carrefour (LSE: 0NPH.L - news) jumps 8 pct after Q3 sales rise

* UK PM May open to extending Brexit transition period

* Wall Street opens in negative territory

Oct (Shenzhen: 000069.SZ - news) 18 - Welcome to the home for real-time coverage of European equity markets brought to

you by Reuters stocks reporters and anchored today by Julien Ponthus. Reach him on Messenger to

share your thoughts on market moves: julien.ponthus.thomsonreuters.com@reuters.net

CLOSING SNAPSHOT: WALL STREET DRAGS EUROPE DOWN (1649 GMT)

Europe's positive start didn't last and benchmarks turned down and accelerated losses into

the close as Wall Street sold off. As I write the Nasdaq (Frankfurt: 813516 - news) is down 2 percent and S&P 500 down 1.2

percent as weak industrial earnings reignite concerns around rising costs and trade disputes.

The leading euro zone index closed down 1 percent but is still on track for a

slight gain on the week.

Earnings disappointments are still being taken very badly and Heidelbergcement's profit

warning sent it down 8.6 percent and construction materials peers tumbled too.

Carrefour was a bright spot with a 9 percent gain after stronger sales figures, while

Ericsson (Hanover: ERCB.HA - news) also rose after results.

Tech, banks, construction materials and basic resources were the worst-performing sectors as

cyclicals got dumped while defensive healthcare, food & beverage, media and telecomms sectors

climbed.

The U.S. stock selloff accelerated after Treasury Secretary Mnuchin pulled out of the Saudi

investment conference - and if this risk-off move continues tomorrow could be an interesting day

for markets.

(Helen Reid)

*****

THE DEATH OF DEFENSIVES (1454 GMT)

Defensives have started to rise again in the past weeks as investors have grown more jittery

and avoided stocks that are highly correlated to the cycle.

It's increasingly looking like investors are less clear about how defensive these

"defensives" really are, though. The structural challenges facing some of the more popular

defensives have been put in stark relief lately with British American Tobacco (Kuala Lumpur: 4162.KL - news) 's shares tumbling

after it cut sales targets.

Neptune (KOSDAQ: 217270.KQ - news) income fund managers told us they're overweight tech, underweight consumer staples

and healthcare, and own no telecoms, tobacco, or utilities whatsoever.

"We don't think these add stability to your portfolio. We think you are risking both your

income and your capital," said Neptune CEO and fund manager Robin Geffen, who also cited figures

showing 78 percent of UK income funds own at least one of the big FTSE 100 tobacco stocks, BAT

or Imperial Brands (LSE: IMB.L - news) .

"This is a dying industry," he added. "In developed markets consumption is

falling, the world has changed."

Justifying his decision to steer clear of telecoms and consumer staples too, he said: "We're

not relying on the UK consumer, not relying on bond proxies."

He also notes he's overweight materials, quipping: "Ten years ago, you would not have seen

me for dust in these" - but highlighting that now the big miners are prioritising returning cash

to shareholders. Who knew miners would become the next defensive stocks?

(Helen Reid)

*****

EUROPEAN BANKS: NO MAGIC RATE HIKE (1407 GMT)

Betting on cheap European banks has been a promising but recurrently losing trade since the

fall of Lehman Brothers and the euro zone sovereign debt crisis.

Political risk, be it in the form of Brexit or a euro zone populist government, never ceases

to be a concern and the toxic legacy of the pre-2008 world with never-ending compliance scandals

is keeping investors on their toes.

And now with growth slowing down, banks don't look very sexy as a proxy for the ever-fading

#Euroboom recovery.

Despite all that, some investors are still putting their hope in the consensual belief that

the ECB will eventually raise its rates and the BOE (Shenzhen: 000725.SZ - news) tighten further.

That might not be such a great idea considering the two recent BOE rate hikes didn't exactly

fuel bullishness in the UK sector.

"For well over a year, analysts have been arguing that rising interest rates would be good

for the banks’ net interest margins and profits by allowing them to increase the cost of loans,

keep funding costs low and pocket the difference," writes Russ Mould, AJ Bell investment

director.

"But the share prices of the five FTSE 100 banks do not seem to be listening as they have

all fallen more rapidly than the headline index," he says in a note on how British banks might

fare when they report Q3 earnings over the next two weeks.

Here's how euro zone and British banks have fallen in harmony the last 12 months, with the

exception of the Italian government scare in May which hit continental lenders much harder.

Bonus, a 2017 souvenir: Big bank trade sours as rate hikes stall, but some still believe

(Julien Ponthus)

*****

TECH CLOSE TO LOSING ITS PLACE ON THE EUROPEAN PODIUM (1233 GMT)

The tech sector has slipped from top European performer to second and now third, overtaken

by a rather unlikely contender: Media stocks.

Last week's sharp selloff in tech sealed its slide into third place as a rotation out of

growth stocks and into value plays picked up pace.

It's a remarkable turnaround for the sector, which was widely shunned last year and is still

the subject of scorn from many investors who believe the "new media" models of the likes of

Google, Netflix (Xetra: 552484 - news) , and Facebook (NasdaqGS: FB - news) make old advertising and publishing models virtually obsolete.

Media was the worst-performing sector in 2017, and is now up 1.8 percent year-to-date,

against a mere 1 percent gain for tech. Oil & gas is the top performer.

Tech's waning dominance reflects investors' dwindling confidence in the sector that has

turbocharged markets across the world, particularly the U.S. and EM.

European investors especially are turning away from the high-growth sector.

"Tech is now the least crowded since 2009," BAML strategists observed in their European fund

manager survey earlier this week.

(Helen Reid)

*****

GLOBAL SYNCHRONISED GROWTH: YOU WON'T LIKE THE SEQUEL (1156 GMT)

Remember how 'global synchronised growth' was the king of the buzzwords to explain the

bullishness of stock markets in 2017?

Well, while 2018 has seen the United States run ahead of other nations thanks to a shot in

the arm from tax cuts, 2019 could be the year when 'GSG' makes a comeback, but it might not be

that popular.

And that's because it will be more a case of U.S. growth slowing down rather than the rest

of the world catching up.

"Global growth should continue to ease further next year and lead to a certain

resynchronization: the impact of the US fiscal boost will wane, Fed tightening should start to

have an effect and corporate investment is expected to slow, which in turn should weigh on world

trade growth," BNP Paribas (LSE: 0HB5.L - news) ' economic research team argues.

See also: IMF cuts world economic growth forecasts as import tariffs, emerging market issues

bite

Here are the BNP Paribas forecasts:

(Julien Ponthus)

*****

SEATBELT SIGNS ON: AIRLINES EXPERIENCING TURBULENCE (1103 GMT)

While Air France's shares are rising strongly on hopes of a pay deal with unions,

airlines have broadly been among the worst performing this month with Flybe sinking 40

percent yesterday. Its profit warning sent peers across the sector tumbling as investors

realised rising fuel prices would likely dent airlines' profits.

As you can see below, the MSCI Europe airlines index is down sharply this year and at an

18-month low. The sector's lost a quarter of its market value since Jan 1, and a whopping 10.9

percent in October.

"Rising fuel and soft yield trends in the face of weakening capacity discipline raise

industry-specific concerns, even before we contemplate macro-economic risks, Brexit and

trade-related uncertainty," write HSBC analysts, who've cut estimates for their whole airline

coverage to factor in higher fuel costs.

With (Other OTC: WWTH - news) competition so intense particularly for budget short-haul airlines, the only hope is

for further M&A in the industry.

"To stabilise or indeed strengthen profitability, airlines need to see capacity moderation

and consolidation," they write.

HSBC also downgrades Norwegian to reduce, sending the shares down 4.6 percent.

"It's a tough time for European short haul air travel and it could be another opportunity

for the big players to hoover up smaller operators and/or their routes," says Neil Wilson,

analyst at markets.com.

(Helen Reid)

*****

BREXIT FATIGUE (1032 GMT)

Funny how last night's fruitless Brexit summit isn't seen as such a bad thing after all!

The pound is back to positive territory as Britain being open to extending the transition

period for leaving the EU is greeted with relief.

A few voices however expressed some degree of despair at the prospect of longer divorce

talks.

"The transition part of the interminably tedious divorce process may be more interminable -

lasting 33 months, not 21 months," complained Paul Donovan, chief economist at UBS Wealth

Management.

"To force us to keep talking about this nonsense for another year seems a cruel and

unnatural punishment," he says while weariness about the whole issue is palpable.

"Markets appear to be viewing the Brexit negotiations with the same exhaustion as everyone

else, as both sides play for time," is IG (Frankfurt: A0EARV - news) analyst Chris Beauchamp's take.

Indeed, Brexit, as a structural issue for markets, isn't going away anytime soon.

"In short, we are unlikely to know for sure whether 'no deal' has been averted until much

closer to the UK's scheduled exit date in March," reckons ActivTrades technical analyst Pierre

Veyret.

As noted by our Buzz team, we most probably are heading into an extra-volatile

end of the year.

Here's how the Daily Mail expressed its feelings about a longer transition period this

morning:

(Julien Ponthus)

*****

AND IT'S UP...(0744 GMT)

It has proven tricky to call the market earlier on this morning but it now seems safe to say

that the mood is gradually switching to 'risk-on'.

Clearly the flurry of trading updates has something to do with investor morale changing

course to the upside.

Telecoms, Media, Retail and Healthcare (Shanghai: 603313.SS - news) are leading the charge with key groups from these

sectors rising following upbeat results. For our top equity stories this morning, click on

.

(Julien Ponthus)

*****

EUROPEAN FUTURES DIP: THE OPEN NOT LOOKING SO FLAT AFTER ALL (0608 GMT)

With Asia slightly in the red and Wall Street futures trading in negative territory, it's

perhaps not that surprising that European futures wouldn't open in the black.

Looks also that the declining pound (-0.18 pct) is ready to give a gentle boost to the FTSE,

with its future up 0.1 percent.

But overall it seems like spreadbetters expecting a slightly positive start of the session

might have been a tad optimistic:

(Julien Ponthus)

*****

UK RETAIL SALES AND BREXIT DRAMA (0555 GMT)

Attention FTSE watchers: if the pound didn't get a proper beating from the lack of results

from the Brexit summit last night, it might come a little bit later this morning at 0830 GMT.

"Pound traders will look to focus on UK retail sales data as a break from the Brexit drama,"

wrote Jasper Lawler from LCG, warning that "this may not be a good thing".

Lawler believes "there is a good chance the UK consumer is reining in their spending ahead

of the Christmas period," an opinion shared by CMC Markets (LSE: CMCX.L - news) ' Michael Hewson.

"Given the decent summer it wouldn’t be unexpected to see consumers pare back their spending

once the schools go back, with expectations of a 0.4% decline."

Quite possible the FTSE then gets a boost from a faltering sterling in morning trading if

retail data proves disappointing.

Perhaps as a sign of the sensitivity of retail data, Tuesday's figures from Kantar had quite

an impact with shares in Tesco (Frankfurt: 852647 - news) and Sainsbury (Amsterdam: SJ6.AS - news) dropping on sluggish growth.

See: Tesco and Sainsbury's post weak growth, lose market share - Kantar

(Julien Ponthus)

*****

MORNING CALL: A FLAT START? (0518 GMT)

European shares are expected to start the session pretty much unchanged with very little

enthusiasm coming from Asia where the MSCI (Frankfurt: 3HM.F - news) broadest index of Asia-Pacific shares outside Japan

fell 0.4 percent.

No breakthrough from the Brexit summit this morning and the main attention of markets seems

to be the dollar at a one week-high after the Fed minutes showed broad agreement on tightening

further.

The Q3 season has yet to start in earnest, but among interesting results this morning are

SAP (Amsterdam: AP6.AS - news) , Thales (LSE: 0IW5.L - news) or Carrefour.

Financial spreadbetters expect London's FTSE to open 5 points higher, Frankfurt's DAX to

rise 6 points and Paris' CAC to edge up 2 points.

(Julien Ponthus)

*****