LIVE MARKETS-Discounters' bite could hurt Tesco, Morrisons

* European stocks move in narrow range

* Publicis (Paris: FR0000130577 - news) , ABB (LSE: 0NX2.L - news) jump after results

* U.S. stocks open lower

LONDON, April 19 (Reuters) - 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

DISCOUNTERS' BITE COULD HURT TESCO, MORRISONS (1517 GMT)

It's been quite a gloomy day for Britain's shopkeepers with the biggest quarterly fall in

retail sales in a year and a fresh new profit warnings for Debenhams (Frankfurt: D2T.F - news) .

While the current mood is definitely grim with Toys R Us UK, electricals group Maplin and

drinks wholesaler Conviviality (LSE: CVR.L - news) going into administration, there is perhaps more bad news to come

further down the road for Tesco (Frankfurt: 852647 - news) and Morrissons.

"Their credit quality could begin to feel the strain in two to three years if they continue

to lose market share to unabated German discounters' growth and they are not able to offset it

with new revenue streams and further cost efficiencies," Moody's rating agency said today.

"Aldi and Lidl's rapid expansion is credit negative for a lot of traditional retailers as it

will push them to keep prices down to retain customers, in turn depressing profitability," said

Vincent Gusdorf, a Moody's senior analyst.

Industry data compiled by Kantar Worldpanel and published at the beginning of April shows

that the big four (Tesco, Morrisons, Sainsbury (Amsterdam: SJ6.AS - news) 's and Asda) were outpaced in terms of sales

growth by discounters Aldi and Lidl, whose sales were up 10.7 percent and 10.3 percent

respectively.

Of course, property firm Hammerson (Frankfurt: 876140 - news) pulling out of its bid for smaller peer Intu (Swiss: OXIGTU.SW - news)

Properties is another sign of the British high street's struggles.

See a previous post here:

(Julien Ponthus)

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DEFENSIVES HAVE FURTHER TO GO (1506 GMT)

That's what Deutsche Bank (IOB: 0H7D.IL - news) strategists led by Andreas Bruckner say in their latest update

where they recommend that investors stay underweight cyclicals vs defensives in Europe.

"European cyclicals have underperformed defensives by 3 percent since Euro area PMIs started

rolling over in late February. We think this has further to go," they say.

"Our favourite defensives are pharma, food & beverage and utilities, our main cyclical

underweights are autos and tech," they add in a note today.

That being said - here's a snapshot of their screen with buy- and hold-rated defensive

stocks that have underperformed the market over the last three months.

(Danilo Masoni)

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SEMICONDUCTORS: SIGNS OF STRAIN (1447 GMT)

Europe's chipmakers are falling sharply today, driving the tech sector down 1 percent after

weak results from Taiwan Semiconductor (TSMC) overnight reignited fears that semiconductors'

reign is nearly over.

Siltronic (IOB: 0R8P.IL - news) , ams, Infineon (Xetra: 623100 - news) , STMicroelectronics (LSE: 0INB.L - news) , BE Semiconductor, ASM International (LSE: 0NX3.L - news) and ASML (Milan: ASML.MI - news)

are down 2 to 5.8 percent.

Mirabaud's TMT (Shanghai: 600458.SS - news) analyst Neil Campling today closed his "buy" on ams, arguing "the iPhone X is

dead". Of course he doesn't mean this literally, but the falling smartphone demand reported by

TSMC is a bad omen of things to come.

In light of TSMC's results, Campling sees Q2 revenues at ams down as much as 35 percent

quarter-on-quarter, saying previous expectations were for an 18 percent fall.

TSMC lowered its outlook in part due to uncertainty in the cryptocurrency mining market: the

slide in cryptocurrencies has dented demand for chips used in crypto mining.

"This is another warning sign to be wary of given the increasing volatility around Bitcoin,

Ethereum et al," says Campling.

Despite the worries around tech, the sector is still up 1.4 percent this year, among the

best-performing in Europe.

(Helen Reid)

*****

RIGGING EUROPEAN VOLATILITY "VERY UNLIKELY", FRENCH WATCHDOG FINDS (1426 GMT)

A manipulation of the VSTOXX, Europe's equivalent of the U.S. volatility index VIX

, is "very unlikely", the French financial markets regulator finds in a research piece

looking at the impact of volatility derivatives during the extreme swings of early February.

France's Autorités des marchés financiers (AMF) notes that an "anonymous whistleblower"

alleged in a letter to U.S. regulators that Wall Street's most widely followed gauge of future

stock market volatility was being manipulated.

According to the AMF, the method used to settle prices for VSTOXX futures makes it less

vulnerable to tampering.

"As the index is calculated every 15 seconds, 61 points are used in calculating the

settlement price of the future (as opposed to a single point for the VIX). Given the liquidity

of Eurostoxx 50 options at this time of the day, it would thus appear much more difficult and

costly to manipulate VSTOXX futures."

The AMF also ruled out a manipulation of France's volatility index, VCAC for a

simple reason:

"Since the VCAC is not an underlying of listed derivatives, a manipulation scheme on the

VCAC index similar to the alleged VIX manipulation may thus be ruled out."

Here's a link to the AMF's research: https://bit.ly/2qJDi3g

And here's more background reading:

Whistleblower alleges manipulation of Cboe volatility index

Chicago firm files lawsuit alleging manipulation of Cboe volatility index

EXPLAINER-Investors burned as bets on low market volatility implode

(Julien Ponthus and Helen Reid)

*****

PLASTIC - NOT SO POPULAR (1417 GMT)

There's been a lot of focus this year on disposable plastic products and their impact on the

environment, and Morgan Stanley (Xetra: 885836 - news) 's analysts have issued a timely note about whether single use

plastic packaging is now reaching peak consumption.

Most interestingly, MS highlight the UK's Pennon Group (Frankfurt: 3PNA.F - news) as a stock exposed to higher

quality plastics -- which they think should be more resilient in light of China's ban on imports

of "foreign garbage" -- via its waste management business Viridor. Likewise they see Suez

and Veolia's recycling businesses as potential growth stories in the

long-term.

But for now, MS point out that demand for virgin plastic is actually increasing due to

China's ban, while they see a relatively low oil price getting in the way of multi year

recycling contracts being renewed - they estimate that oil needs to stay "significantly" above

$65 a barrel in order for recycled plastic to be economically viable.

So it looks like, for now, there are still quite a few obstacles to the "circular economy"

dream, though moves such as yesterday's announcement that Britain is planning to ban the sale of

plastic straws and other single used products are positive signs.

And on the plus side, there is some hope for Europe more broadly.

"Europe is the region where we see most potential for a drop in the use of plastic consumer

packaging," Morgan Stanley's analysts say in a note.

"Regulation is being discussed, companies are changing their products and consumers are

adapting their behaviour," they add.

Here is a chart from Morgan Stanley showing how much plastic each country consumes every

year, based on data from Statista.

(Kit Rees)

*****

MID-SESSION SNAPSHOT: SMALL MOVES BUT SHIRE SPIKES (1230 GMT)

It's mid-session and price levels look to be broadly where we've left them this morning,

having the STOXX 600 moved in a quite narrow range of 0.25 percent between its low and its high.

What's new is the spike in Shire (Xetra: S7E.DE - news) shares, now up more than 5 percent after a

source-based Reuters report said Takeda Pharmaceutical has tabled a bid that values

British rare disease specialist at around $61 billion.

And news has just broke with Takeda confirming the offer but also saying that though talks

between parties are ongoing after the board of Shire rejected it.

Here's the latest update on Shire and in the snapshot its move:

Meanwhile, media stocks are still boosted by the sales beat at Publicis while a rise to peak

in commodity prices is boosting energy and miners.

(Danilo Masoni)

*****

CROSS-BORDER M&A: A BITTERSWEET FRANCO-GERMAN BANKING IRONY (1145 GMT)

Well, bitter for Germany and sweet for France that is!

In its latest assessment of the banking sector in both countries, Scope Ratings finds that

despite the dominance of the German economy over the Euro zone, French banks are much more

likely to lead a possible wave of cross-border mergers.

"If Europe witnesses large-scale cross-border consolidation, the French banks will most

likely be at the forefront, as they were before the crisis," its analysts write, noting their

"strong prudential metrics" and their commitment to universal banking.

"Taken as a whole, German banks are far less international and less diversified," writes

Samuel Theodore, head of financial institutions ratings, later telling us that he "definitely

doesn't see German banks having any appetite for cross-border acquisitions".

He also notes "the irony of Europe's strongest economy having a banking sector with a

still-antiquated structure".

Rumours of France's big players such as SocGen (Paris: FR0000130809 - news) , Credit Agricole (Swiss: ACA.SW - news) or

Credit Mutuel circling on German, Spanish or Italian targets have been doing the rounds for a

while now and in this context one has to note BNP Paribas (LSE: 0HB5.L - news) ' $1 bln deal to buy Raiffeisen's

business in Poland last week.

Also note France's Macron efforts to reinforce Euro zone integration in today's news:

Merkel, Macron meet to plot euro zone reform road map

Here's a chart which illustrates how BNP Paribas and SocGen overtook Deutsche Bank and

Commerzbank (Xetra: CBK100 - news) from the pre-financial crisis levels of 2007.

(Julien Ponthus)

*****

WHAT'S IN STORE FOR REITS? (1120 GMT)

Yesterday UK commercial property stocks were in focus after Hammerson pulled out of

a bid for Intu Properties (LSE: INTU.L - news) . A couple of brokers mull what lies ahead for a sector

facing multiple challenges.

"We think NAVs (net asset value) are about to take a cold shower with shopping centres

taking the plunge first, and our cash flow analysis which pre-empted HMSO’s dividend issue a

year ago, confirms that REITs are in a weak and weakening position," Jefferies analysts say in a

note.

Jefferies analysts also weren't fans of the proposed takeover, and now think that

Hammerson's board is now in an "untenable" position given that it didn't engage fully with

Klepierre (LSE: 0F4I.L - news) , and shareholders are "likely to demand the boards’ collective heads on spikes".

In a note entitled 'Just not that Intu you (anymore)', Barclays (LSE: BARC.L - news) analysts upgrade Hammerson

to "equal weight" and moved Intu to "underweight".

Though Barclays does point out that is only took Hammerson four months to change its mind

about the deal.

"We always failed to see a clear rationale for the Intu deal: bigger does not necessarily

mean better," Barclays analysts say in a note, adding that now Hammerson will be free to focus

on "nearer term shareholder value creation", such as making disposals, investing in

higher-growth areas such as premium outlets and Ireland (Other OTC: IRLD - news) and an evaluation of the potential

returns from its capital projects.

(Kit Rees)

*****

WILL EUROPEAN BANKS SURF THE EQUITY TRADING BOOM? (1034 GMT)

Big Wall Street banks have reported above-consensus quarterly numbers but what really stood

out were the booming equities revenues: +32%, driven by the spectacular reawakening of

volatility at the start of the year.

Now (Frankfurt: 11N.F - news) it's European investment banks' turn with results from UBS (LSE: 0QNR.L - news) , Deutsche Bank

, Barclays and Credit Suisse (IOB: 0QP5.IL - news) all lined up for next week, and analyst

expect similar patterns, although the dollar weakness could hurt.

Here's in two bullets, courtesy of Citi , what to expect from European investment banks:

* Very Strong Equities To Benefit Societe Generale & UBS "The pick-up in VIX resulted in

very

strong Equity volumes across both cash and derivatives in 1Q18, with particular strength in

derivatives. SocGen & UBS look best placed to benefit in our view."

* Weak FICC To Hurt Barclays and Deutsche Bank: "In sharp contrast CVIX and MOVE indices

were more

muted, while Rates were also negatively impacted by further yield curve flattening. Credit was

notably weaker yoy, due to a fall in DCM (KSE: 024090.KS - news) activity and as spreads started to widen. BARC & DB are

highly exposed to Credit, as is CS, albeit stronger equities should help offset at the latter."

(Danilo Masoni)

*****

TRADE WARS: THE FED'S 36 SHADES OF BEIGE ANXIETY (1002 GMT)

There's quite a lot of skepticism out there on whether the Trump administration is actually

willing to get into a full-blown trade war with China, given corporate America's pro-free trade

agenda.

One way to assess the nervousness and the resistance of the business establishment to a

trade war can be found in the "Summary of Commentary on Current Economic Conditions by Federal

Reserve District", otherwise known as the "Beige Book".

Paul Donovan, chief economist at UBS Global Wealth Management, spotted that the publication

--"an economist's "Hello" magazine of anecdote and gossip"-- mentioned "tariff" 36 times, and

"not in a good way".

He adds: "This is not surprising. The economic cost of trade taxes was always likely to

exceed any benefit from US President Trump's tariff signing Twitter (Frankfurt: A1W6XZ - news) moment."

Here's a link to the publication: https://bit.ly/2Hatslr

During a presentation on Tuesday, Mike Bell, global market strategist at J.P. Morgan Asset

Management, summed up in an eloquent way how skeptically some analysts view Trump's trade war

rhetoric:

"Like a WWE wrestling match there’s an awful lot of talk but very little damage done", Bell

said, adding that "we see this as more of skirmish than a war and expect China to do more of

what the U.S. wants and avoid an escalation".

Here's a screenshot where you can see that a search for "tariff" on the beige book gives you

36 hits, and usually the words "concern" or "risk" are not far away.

(Julien Ponthus and Tom Finn)

*****

M&A IN U.S. TECH RUNNING AT FULL DOT-COM BUBBLE SPEED (0915 GMT)

With (Other OTC: WWTH - news) so many strategists calling for caution on the U.S. tech sector, it's hard to tell

whether M&A running at full pre dot-com bubble speed is a sign of good health or a rather

sinister omen.

Anyhow, Thomson Reuters (Dusseldorf: TOC.DU - news) research shows that M&A activity in the U.S. is at its highest level

since the 2001 tech bubble burst. Have a look:

Following the Facebook (NasdaqGS: FB - news) /Cambridge Analytica scandal, a growing number of analysts have warned

investors that the sector could face a wave of regulation similar in scale to the post-financial

crisis banking regulations and even perhaps in the magnitude of the anti-monopoly drive which

restructured the U.S. economy at the beginning of the 20th century.

Here's what Saxo Bank told its clients in its outlook for Q2:

(Julien Ponthus)

*****

OPENING SNAPSHOT: EUROPE MIXED AS EARNINGS DOMINATE, MINERS RISE (0710)

Main European stock indexes are off to a mixed start, although moves are small in both

direction, as investors go through a jungle of earnings updates.

Further gains in mining stocks, as metal and oil prices hit new peaks, however is providing

support.

Here's your opening snapshot:

(Danilo Masoni)

*****

WHAT'S ON THE RADAR FOR EUROPEAN STOCKS (0649 GMT)

Earnings take centre stage today as futures point to a positive open, with stellar gains in

commodities stocks likely to keep driving the market up after crude prices hit new late-2014

highs overnight and aluminium and nickel prices continued to surge.

The earnings season is gathering pace with consumer giants Nestle (Swiss: NESN.VX - news) and Unilever (NYSE: UL - news) reporting,

both confirming their 2018 outlook and indicated up 1 percent in pre-markets.

Investors are particularly watching currency movements this season, and some companies will

have been under strain due to the strong euro.

M&A news will also move stocks: Merck KGaA (LSE: 0O14.L - news) ’s shares are seen gaining 2 to 3 percent after

Procter & Gamble (Swiss: PG-USD.SW - news) agreed to acquire its consumer health business for around 3.4 billion euros.

Weir Group (Other OTC: WEIGY - news) is indicated down 3 to 4 percent, however, after announcing a $1.28 billion deal to

acquire Esco Corporation.

A difficult season for UK retail continues with Debenhams indicated down 10 percent after

warning on its outlook and cutting its dividend. Ultra Electronics (Frankfurt: 909716 - news) was also seen falling 10

percent by some traders after saying it was being investigated by the SFO for suspected

corruption in Algeria.

Some extra headlines to watch:

Unilever stands by outlook after Q1 meets expectations

Ultra Electronics investigated by UK's SFO for "suspected corruption" in Algeria

Hedge fund Elliott issues new attack on Vivendi (LSE: 0IIF.L - news) over Telecom Italia (Amsterdam: TI6.AS - news)

Debenhams cuts dividend as first-half profit slumps

Southwest challenged engine maker CFM over proposed FAA inspections

Acacia Mining (Frankfurt: 33A.F - news) posts lower Q1 earnings, maintains FY targets

(Helen Reid and Danilo Masoni)

*****

EUROPEAN STOCK FUTURES RISE AS EARNINGS DOMINATE (0612 GMT)

Futures across the major benchmarks are up 0.1 to 0.2 percent, indicating an upbeat open

after a strong trading day yesterday - particularly for commodities stocks.

ABB shares are indicated up 1.6 percent higher after its profit beat, while Nestle is seen

gaining 1 percent after it reported growing volumes.

Today is going to be dominated by earnings, with some M&A news sprinkled in as well - here

are a few extra headlines to watch:

Publicis beats Q1 growth expectations on North American rebound

Schneider Electric (EUREX: SND1.EX - news) beats Q1 revenue forecast on upbeat China demand

Pernod Ricard (TLO: RI-U.TI - news) gives more upbeat outlook after strong Q3

Aéroports De Paris Acquires Exclusive Control Of Airport International Group

Weir Group to buy Esco Corporation in $1.28 billion deal

(Helen Reid)

*****

EARNINGS, M&A: CORPORATE NEWS ROUND-UP (0532 GMT)

The earnings season is gathering pace and today we've got ABB reporting its best

start to the year since 2015, and a huge M&A move with Procter & Gamble agreeing to acquire the

consumer health business of Merck KGaA for around 3.4 billion euros.

It's a big day for consumer staples with Nestle also reporting increased volume

growth and confirming full-year guidance.

In other interesting results, Swiss pumpmaker Sulzer (IOB: 0QQ9.IL - news) , whose shares were dented by

sanctions on its main Russian shareholder, confirmed its 2018 outlook - saying it saw a one-off

hit of 10 million Swiss francs from business disruption due to the sanctions.

Currency movements are going to be particularly important this results season, and while

some companies will have been under strain due to the strong euro, others could benefit.

Novartis (IOB: 0QLR.IL - news) said it got a boost from a weaker dollar helping its first-quarter sales rise

10 percent.

Here are some of the headlines that have caught our eyes:

ABB's first quarter profit beats forecasts

P&G to buy German Merck's consumer health business for about $4.21 bln

Sulzer confirms 2018 outlook, sees small hit from sanctions impact

Nestle confirms outlook as volume growth picks up

Novartis Q1 sales beat gets help from weak dollar

France's AccorHotels upbeat about 2018 after strong Q1 sales

Total (LSE: 524773.L - news) buys stake in U.S. battery developer Ionic Materials

Deutsche Bank COO to leave amid continuing management reshuffle

(Helen Reid)

*****

EUROPE SEEN OPENING HIGHER AS RESOURCE STOCKS SHINE (0515 GMT)

Yesterday's resource stocks strength has spread into Asian trading overnight as oil prices

hit new highs not seen since late 2014.

Brent crude climbed to $73.77 a barrel, while U.S. crude rose to $68.73 after a Reuters

report that Saudi Arabia would be happy for crude to rise to $80 or even $100.

European stocks are likely to maintain Asia's trend higher, with spreadbetters calling the

DAX 18 points higher at 12,609, the CAC 40 up 14 points at 5,394, and the FTSE 100 6 points

higher at 7,323.

(Helen Reid)

*****

(Reporting by Danilo Masoni, Helen Reid, Kit Rees and Julien Ponthus)