UK Markets closed

LIVE MARKETS-A deeper look into the London trio's profit warnings

* China's conciliatory statement boosts European stocks * STOXX 600 +0.7%, FTSE 100 +1.2% * Tech stocks outperform, luxury underperforms * Pearson and Imperial Brands slump on profit warnings Welcome to the home for real-time coverage of European equity markets brought to you by Reuters stocks reporters and anchored today by Thyagaraju Adinarayan. Reach him on Messenger to share your thoughts on market moves: rm://thyagaraju.adinarayan.thomsonreuters.com@reuters.net A DEEPER LOOK INTO THE LONDON TRIO'S PROFIT WARNINGS (1009 GMT) A cigarette maker, an airline and an education group - what's the one thing in common between them today? Profit warnings. Combined $5 billion has been wiped from London blue-chips Pearson, Imperial Brands and British Airways-owner IAG as they warned on full-year profits. The warnings meant the trio are missing out a lift-off from the broad rally in European stock markets, which are dancing to a different tune -- China's conciliatory statement on trade relations with the U.S. Lufthansa and Ryanair are in red on IAG profit warning, while British American Tobacco is down 2% on Imperial's warning. Otherwise, these warnings seem to be confined to the sector in itself than a broad-based slowdown. 1. Pearson shares plunge 20% after it warned on annual profits due to a sharp slowdown in U.S. higher education courseware business. Mirabaud tech analyst Neil Campling says: "CEO Fallon has been in charge of this slowly sinking ship for more than six years now, and the CFO alongside him for four years. It feels like the 'midst of a transformation' (as described in the 2017 annual report) is likely to create 'red mist' among frustrated shareholders." 2. Imperial Brands slumps 10% to 8-1/2 year lows after it blames the deteriorating new gen products environment in the U.S. amid a regulatory crackdown on vaping. UBS says: "We expect the uncertainties around the execution around NGP (Next Generation Products) strategy to weigh on the shares near term." 3. IAG joins the profit warning club of other European long-haul airlines today after major pilot strikes grounded thousands of flights. Bernstein says: "As the last of the three large full-service carriers, IAG this morning lowered its full year guidance... Overall, this confirms our cautious stance on the EU airline space." (Thyagaraju Adinarayan) ***** HOW TO PLAY FRANCE'S ECONOMIC RESILIENCE (0935 GMT) It's not all doom and gloom in the euro zone economy and while a manufacturing recession in fiscally conservative Germany is a cause for concern, France - the bloc's No. 2 economy - has held up relatively better. France, which presents its 2020 budget today, is set to grow 1.2% next year, twice as much the rate seen for German GDP, according to OECD estimates, while its consumer confidence is at its highest since January 2018, helped by tax cuts. But what does this all mean for French equities? UBS favours plays geared to household consumption, while at an aggregate index level, much of the country's economic resilience looks priced in. "Increased fiscal spending has supported domestic demand this year, notably household consumption. The reduction in employees' social security contributions, the cut in housing taxes as well as those emergency measures adopted in response to the yellow vest protests added up to around 0.3% of GDP in 2019," they say. "The government has announced income tax cuts for 2020 and we expect some moderate fiscal spending to continue to underpin household consumption as well as a reiteration of the special purchasing-power bonus," they add. Drilling down to their top household picks, they single out Accor, Carrefour and Gecina. (Danilo Masoni) ***** TRADE: CHINA TO THE RESCUE (0735 GMT) The opening losses this morning amid general gloom over U.S. tariffs and a torrent of profit warnings suddenly evaporated as soon as some conciliatory comments over trade crossed the wires from Beijing's Commerce Ministry. European stocks are now up 0.2% as investors cheer the warm comments, boosting in particular trade-sensitive autos, tech and industrial stocks. But gains are however limited on renewed expectations the WTO will officially authorise U.S. tariffs on European goods imports due to subsidies provided to Airbus - part of a two-way trade spat likely to lead next year to EU tariffs over U.S. subsidies to Boeing. Luxury and food & beverage stocks are on the backfoot this morning on EU tariff worries. While, trade takes centre stage in broad index-based moves, some poor earnings updates are roiling some London blue-chip stocks: Pearson -13% (top faller), Imperial Brands -8.5% and British Airways-owner IAG -2% after their profit warnings. Among other single stock movers, ABN Amro is deep in red after the Dutch Bank said it is subject to money laundering investigation, joining many other European rivals that have been hit by similar charges. Local rival ING Groep last year agreed to pay $900 million to settle a money laundering case. (Thyagaraju Adinarayan) ***** EUROPE UNDER PRESSURE AS WTO RULING ON TARIFFS LOOMS (0657 GMT) It's all about trade. Stock futures point to a slightly lower open for Europe this morning on expectations the WTO will officially authorise U.S. tariffs on European goods imports due to illegal state aid provided to Airbus. Reuters reported earlier this month that the WTO had accepted the U.S. request, with a deadline for an official ruling set for Monday. Few details have emerged about the U.S. plan, but Bloomberg reported, citing sources, WTO is likely to authorise tariffs on $8 billion worth of European goods. Those worries are offsetting potential gains from U.S. President Trump's comments last evening that a U.S.-China trade deal could happen "sooner" than people think. In corporate news, Ericsson shares are seen opening 2% lower after the Swedish telecom equipment maker said its Q3 results will be hit by a 12 billion Swedish krona ($1.23 billion) provision it was making for U.S. investigations linked to the company's compliance with the U.S. Foreign Corrupt Practices Act (FCPA). Pearson shares are seen down 3%-4% after the British education company said full year profit is expected to come in at the bottom of its guided range due to weaker-than-expected trading in its U.S. higher education courseware business. Imperial Brands shares are seen opening 5%-7% lower after it slashed full-year outlook citing weakness in new generation products. The news is likely to weigh on rival British American Tobacco's shares. British Airways-owner IAG is seen sliding 3% as it warned on profits after pilot strikes led to thousands of cancelled flights and disruptions at the airline. It may drag other airlines with it. Dutch bank ABN Amro seen down 3% after it said it is subject to an investigation for failing to prevent money laundering over a long period of time. U.S. chemical company HB Fuller's warning overnight is likely to put pressure on shares of European rivals Henkel and Sika, according to dealers. Key headlines: Swiss competition authority OKs Sunrise plan to buy Liberty Global's UPC Former Danske Estonia boss found dead amid money laundering inquiry Ericsson makes $1.2 bln provision to settle U.S. probes, flags Q3 hit BRIEF-Hella Confirms 2019/2020 Outlook After Q1 Adjusted EBIT Decline BRIEF-EssilorLuxottica says profits to grow faster than sales in long term Pearson warns on profit on weak U.S. trading Dutch prosecutors confirm money laundering probe at ABN Amro British Airways owner IAG expects lower profit, cites major strikes (Thyagaraju Adinarayan) ***** FLAT AS PANCAKE (0523 GMT) European stocks are expected to open nearly unchanged as investors await more clarity on U.S.-China trade deal after President Trump said deal could happen sooner than people think. Positive trade deal comments helped stocks halve their losses last evening, but those gains seem to be short-lived. Financial spreadbetters IG expect London's FTSE to open 6 points lower at 7,284, Frankfurt's DAX to open 5 points higher at 12,239, and Paris' CAC to open 1 point lower at 5,583. U.S. final Q2 GDP numbers and weekly jobless claims are the key data points to watch out for this afternoon. (Thyagaraju Adinarayan) ***** (Reporting by Danilo Masoni, Josephine Mason and Thyagaraju Adinarayan)