LIVE MARKETS-Early afternoon snapshot: STOXX off lows after US data

LONDON, March 1 (Reuters) - Welcome to the home for real-time coverage of European equity

markets brought to you by Reuters stocks reporters and anchored today by Kit Rees. Reach her on

Messenger to share your thoughts on market moves: kit.rees.thomsonreuters.com@reuters.net

EARLY AFTERNOON SNAPSHOT: STOXX OFF LOWS AFTER US DATA (1428 GMT)

European shares have managed to come off lows as US stock futures pared losses after data

showed consumer spending in January notched its smallest increase in five months and core

inflation rose less than expected.

The STOXX was last down 0.7 percent, having lost more than 1 percent earlier in the session.

In this snapshot how European indexes look like just before Wall Street opens.

Despite the slight rebound from lows, interest rate worries linger.

"The latest sell-off was triggered by hawkish comments from the new Fed chief Jerome Powell.

He is due to testify again today, but I doubt he’ll say anything new this time," says Fawad

Razaqzada, analyst at Forex.com.

(Danilo Masoni)

*****

KINDLY STEP AWAY FROM THE SECTOR (1337 GMT)

In the small- and mid-cap world, strategists at JPM do not advise trying to play a rising

rate environment by sector positioning.

"Feedback (LSE: FDBK.L - news) from 2 weeks of mktg shows that positioning for a rate hiking cycle is front and

center in the minds of investors today," say JPM's strategists in a note.

"CAUTION! What historically worked in such scenarios may not be advisable this time around

as this hiking cycle is starting at a much later stage of the economic cycle and thus may be

short-lived," JPM say, adding that sector selection is a macro call which is "unnecessarily

risky" in the 10th year of a bull market.

Plus they flag that financials haven't been default outperformers during periods of rising

interest rates.

So what to do then? JPM say they are staying "fully invested" in equities, focusing on

stocks with high free cash flow yields, solid balance sheets, and limited downside. They are OW

Eurozone vs UK.

(Kit Rees)

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EUROPEAN BANKS' STRESS TESTS: SPOILER ALERT! (1255 GMT)

Investors patiently waiting for November to discover the results of the European Banking

Agency's (EBA) stress tests beware!

Moody's published a major spoiler for those who would rather not have any hint of the plot.

"The test will show that the banks are more resilient to economic stress," Swen Metzler,

Vice President at the rating agency wrote in a note covering the issue.

"The tougher economic assumptions this year may lead to a higher overall hit to capital

ratios. However, the banks' starting capital is higher this time, giving them greater

resilience," he believes.

Moody's reminds us that debt investors typically benchmark the banks' performance in the

stress tests to price the risk premiums but equity analysts also take a very close look at the

resilience of the capital.

As a reminder, the banking sector is still a favourite for 2018. It's currently in

third position, up 0.8 percent year-to-date and trailing behind insurers, which are

rising 1 percent. Automotives are leading the race up 1.4 percent since the beginning of the

year.

Here's a look at how banking sectors from different EU countries compare in terms of capital

buffers:

(Julien Ponthus)

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UK RETAIL: NOW IS THE WINTER OF OUR DISCONTENT (1221 GMT)

Investors weren't keen on UK domestic firms to begin with, given their reliance on the UK

economy and sensitivity to Brexit, and today we've had another casualty -- Carpetright (EUREX: CPRF.EX - news) -- which

demonstrates how discerning investors need to be when looking for value in this neck of the

woods.

As you can see from the chart below, Carpetright (Other OTC: CGHXF - news) has been trading at its cheapest since the

2008 financial crisis -- bargain! Or maybe not.

This trend is particularly evident among UK retailers - note both Toys 'R' Us and Maplin

have gone into administration in the last 24 hours. This just shows what a lack of innovation

can lead to in a very competitive market, which is going through a tough time thanks to

disruption and weak consumer demand.

This isn't limited to smaller retailers either. Laura Foll, a fund manager at Janus (Shenzhen: 300083.SZ - news)

Henderson Investors, highlighted stalwart of the UK high street M&S.

"What we're finding is that those companies that have a high absolute level of yield are

often value traps that don't have much by way of earnings growth," says Henderson's Foll.

Foll points to M&S failing to deliver earnings growth despite offering a yield of around

percent and a new chief exec coming in.

(Kit Rees)

*****

IT'S NOT YOU, IT'S ME: HOW STOCK MARKETS THREATEN THE GLOBAL ECONOMY (1110 GMT)

What if it's not about how politics or the "real economy " impact markets but the other way

round? Is there a case to view the current uncertainty about the resilience of stock markets as

a threat to the global economy?

Actually there is, says the Economist Intelligence Unit (EIU) in a report where it

identifies the top 10 risks to the global economy. Number one are stock markets.

"There is a risk that share prices will crash in the US, which would lead to contagion

around the world. A prolonged period of decline would pose major risks to our global economic

outlook," the EIU writes.

The research and analysis division of The Economist Group argues that the early February

correction triggered by fears that faster than expected inflation could lead to interest rates

rising more quickly than foreseen, "could be the start of a more pronounced downturn".

The EIU says that company earnings have strongly benefited from ultra-low interest rates and

the huge stimulus pumped into the economy by the Fed through quantitative easing (QE).

"The true impact of QE on company valuations will become known over the next two years as

the Fed gradually unwinds its QE programme and tightens monetary policy."

How central banks will fine-tune their path to monetary normalisation and how this will

impact stock markets is "giving rise to significant uncertainty", the EIU concludes.

If stocks markets currently seem to pose a threat to the world economy, there's also plenty

out there for equity investors to be worried about.

Here the EIU's list:

(Julien Ponthus)

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ITALY'S VOTE, THE DAY AFTER: HOW COULD MARKETS REACT? (1028 GMT)

A lot has been written about the Italian general election and how markets look quite relaxed

about it. To keep it short, here are two nice charts from Natixis (LSE: 0IHK.L - news) summing up what investors will

look at on the day after the March 4 vote and how would the bond market react.

A "narrow grand coalition government" and a "right-wing government" are the only two market

friendly scenarios and their combined probability of happening stands at 40%. Both would trigger

a reduction in government bond yields, according to the French bank.

(Danilo Masoni)

*****

RESULTS DRAG EUROPEAN SHARES, INVESTORS WARM TO UK DOMESTICS (0852 GMT)

We're seeing some big moves early on for European shares, which are down for a third session

in a row.

And the bulk of these falls are earnings-driven, with updates getting either a hot or cold

reception, with no middle ground.

WPP (Frankfurt: A1J2BZ - news) , Rentokil, Carrefour (LSE: 0NPH.L - news) and Adecco (Swiss: ADEN.VX - news) are all down between

a hefty 8 to 12 percent, while equally a slew of UK firms such as Cobham (Other OTC: CBHMF - news) , Merlin

and Howden Joinery (Frankfurt: 884600 - news) are dominating the gainers.

So are UK domestics finally feeling some love?

Here's your early morning snapshot:

(Kit Rees)

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PRE (Shanghai: 600048.SS - news) -OPEN ROUNDUP: TOIL AND TROUBLE IN EUROPEAN RETAIL

Like the weather in the UK, European shares are going to have a frosty start today with

stocks futures down around 0.4 percent. The wounds of February are far from healed no matter how

much investors want to move on, as equity markets continue to worry about a more hawkish Fed,

volatility and rising bond yields.

February was the STOXX 600’s worst month since June 2016 (Brexit month!).

Today earnings continue to be in focus, in particular in the retail sector after Carrefour (Swiss: CA.SW - news)

yesterday cut its dividend and sounded cautious with its guidance – just shows how much pressure

these supermarket giants are under from the likes of Amazon.

Also note that the UK's Carpetright is in talks with lenders after its profit warning back

in January - another sign of stress in the sector.

Automated warehouse equipment-maker Kion might have redeemed itself after meeting analyst

expectations thanks to higher sales – last October its shares sunk after cutting 2017 guidance

(up until then it had been a popular play on automation + tech).

Here are your key headlines from this morning:

AB InBev (Brussels: ABIT.BR - news) reaps profit in Brazil, sees strong 2018 growth

Peugeot (Other OTC: PUGOF - news) hits new earnings record despite Opel loss

British ad group WPP to simplify business after tough 2017

Daimler (IOB: 0NXX.IL - news) buys Europcar (Munich: 28584919.MU - news) out of car-sharing venture

Adecco gets off to slower start in 2018 after Q4 profit beat

Utility Suez to boost cost cuts, signs record 1.2 bln contracts

UK's Carpetright in talks with lenders after profit warning

Petrofac (Amsterdam: PF6.AS - news) posts better-than-expected FY core earnings [nL4N1QJ2T2}

Beiersdorf (IOB: 0DQ7.IL - news) gives cautious outlook after strong 2017

New York regulator asks Deutsche, other banks about Kushner loans -source

UK's Carpetright in talks with lenders after profit warning

UK's Howden Joinery posts 7.4 pct rise in full-year revenue

Recruiting firm Robert Walters (LSE: RWA.L - news) reports 44 pct annual profit jump

Madame Tussauds owner Merlin core earnings rise 9.5 pct

UK builder Bovis says volumes will grow in 2018 after profit slump

Essilor predicts relatively flat profits ahead of Luxottica (Milan: LUX.MI - news) deal

Kion posts 26 percent rise in operating profit on truck sales

(Kit Rees and Tom Pfeiffer)

*****

CARREFOUR'S "TOUGH READ" - STILL SOME WAY TO GO? (0726 GMT)

Europe's dominant supermarket chain Carrefour's full-year update after yesterday's

market close underlines how gloomy it's looking for the sector, hit by heavy price

competition and with tech players such as Amazon challenging longstanding business models.

Analysts at Jefferies were prepared to see a "tough read" from Carrefour today, saying

"nearer-term competitive and fx conditions remain highly volatile"

Interestingly, yesterday it's peer Ahold Delhaize saw its shares bounce 3 percent

after reporting results, saying that savings from U.S. tax reforms could instead be invested

into its online offering.

The winner techs all in food retail?

(Kit Rees)

*****

EUROPEAN STOCKS FUTURES FALL, EARNINGS IN FOCUS (0702 GMT)

Even (Taiwan OTC: 6436.TWO - news) if things are set to be muted at the index level, with stocks futures opening around

0.4 percent lower just now, there are plenty of firms giving updates today to keep things

interesting - a full list for Europe is below.

Of note are full-year figures from Kion, which was hit hard last October when it cut its

2017 profit guidance due to customers delaying investments, so today's release will be closely

watched.

BMPS.MI Full Year 2017 Banca Monte dei Paschi (Milan: BMPS.MI - news) di Siena SpA Earnings

Release

KBHL.CO Q4 2017 Copenhagen Airports A/S Earnings Release

BTPP.PA Full Year 2017 Affine RE SA Earnings Release

APETIT (LSE: 0F55.L - news) .HE Q4 2017 Apetit Oyj Earnings Release

NHBG.MU Q4 2017 Nebelhornbahn AG Earnings Release

TTOG.F Q4 2017 TTL Beteiligungs und Grundbesitz AG Earnings Release

SPSN.S Full Year 2017 Swiss Prime Site AG Earnings Release

AMPF.MI Q4 2017 Amplifon SpA Earnings Release

APME.DE Full Year 2017 Ad Pepper Media International NV Earnings

Release

IMPN.S Full Year 2017 Implenia AG Earnings Release

FNTGn.DE Q4 2017 Freenet AG Earnings Release

EVRE.L Full Year 2017 EVRAZ (LSE: EVR.L - news) plc Earnings Release

KGX.DE Q4 2017 Kion Group AG Earnings Release

ARGX.BR Full Year 2017 argenx NV Earnings Release & Q4 Business

Update

FITBIO.HE Q4 2017 FIT Biotech Oy Earnings Release

ESSI.PA Full Year 2017 Essilor International SA Earnings Release

RTO.L Full Year 2017 Rentokil Initial PLC Earnings Release

SDR.L Full Year 2017 Schroders PLC Earnings Release

NEX.L Full Year 2017 National Express Group PLC Earnings Release

COB.L Full Year 2017 Cobham PLC Earnings Release

HWDN.L Full Year 2017 Howden Joinery Group PLC Earnings Release

SYNTS.L Full Year 2017 Synthomer PLC Earnings Release

(Kit Rees)

*****

EUROPEAN SHARES SEEN OPENING LOWER (0648 GMT)

Good morning. Is it going to be a new month and a fresh start? That's looking unlikely.

Following on from a weak session in the U.S. as markets continue to digest Fed Chair

Powell's testimony, European shares are seen opening lower, according to financial

spreadbetters. Britain's FTSE 100 is seen opening 42 points lower, Germany's DAX is expected to

fall 87 points and France's CAC is seen 29 points lower.

So it looks like it's going to be a muted start to March, following the STOXX's worst month

since June 2016.

(Kit Rees)

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