LIVE MARKETS-An "early-year wobble" for European equities

* European stocks set for biggest weekly loss in 6 months

* Deutsche Bank (IOB: 0H7D.IL - news) , Caixabank (Amsterdam: CB6.AS - news) , Sabadell down after results

* Eyes on U.S. payrolls data

Feb 2 (Reuters) - Welcome to the home for real time coverage of European equity markets

brought to you by Reuters stocks reporters and anchored today by Danilo Masoni. Reach him on

Messenger to share your thoughts on market moves: danilo.masoni.thomsonreuters.com@reuters.net

AN "EARLY-YEAR WOBBLE" (1510 GMT)

The STOXX 600 is set for its biggest one-day loss since the end of last June, so we asked

Gavin Launder, senior portfolio manager in the active equities team at Legal & General (LSE: LGEN.L - news)

Investment Management, what he made of the recent weakness in equity markets.

"The markets have had a number of very strong years. I think we're getting a bit of an

early-year wobble," Launder said, adding that he was waiting to add to the portfolio soon.

"(Bond yields) are rising from extremely low levels. There ought not to be a great

read-across to equities until they at least normalise."

(Kit Rees)

*****

EUROPEAN STOCKS STILL A BARGAIN RELATIVE TO U.S. (1459 GMT)

While the STOXX 600 is heading towards its worst week in six months, Morgan Stanley (Xetra: 885836 - news) says

there are still reasons to prefer European stocks.

"We think the relative investment case for European equities looks increasingly compelling

as it is relatively oversold, sentiment is more downbeat than elsewhere and relative valuations

are close to 10-year lows," MS strategists argue.

Clients have challenged their view, saying the apparently lower valuations in Europe are

mostly down to sector composition. But the bank's crunched the numbers and says even after

controlling for the different sector weights, the region is 9 percent cheaper than the

historical average versus the U.S.

Among sectors only chemicals, semiconductors, telecoms, autos and luxury goods are

relatively expensive to U.S. peers versus history, MS finds.

(Helen Reid)

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IS THIS JUST A TASTER? (1438 GMT)

Things are getting increasingly ugly out there and our screens are flashing in a most

non-ambiguous red that the New Year rally is no more.

So, is this a healthy pullback, a minor correction, a technical sell-off, or the beginning

of the end?

According to Unicredit (EUREX: DE000A163206.EX - news) analysts, this could just be a taster of what's to come later.

"This period has been a taster of what might occur when investors anticipate a substantial

normalization rather than a minor sell-off," they say in a note, where they "recognize that the

vulnerability of equity markets has increased, with interest rates trending higher and the USD

remaining weak."

They take the view however that "global synchronised growth" and corporate earnings should

keep the engine going.

"Nevertheless, it should be clear that the period of historically low volatility is drawing

to a close and that equity investors will have to deal with more-volatile trends in the coming

months," they warn.

(Julien Ponthus)

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U.S. PAYROLLS: BIG NUMBER, AND EUROPEAN STOCKS COME OFF LOWS (1350 GMT)

U.S. annual wage growth saw its biggest annual gain since 2009, a strong number which

boosted expectations of higher inflation.

Non-farm payrolls rose by 200,000 last month.

U.S. futures extended losses and the dollar jumped on heightened expectations of three Fed

rate hikes this year. The weaker euro helped ease some pressure on European

equities. Look at the export-oriented German index DAX: it was down 1.1 percent, having

earlier fallen as much as 1.65 percent.

(Kit Rees)

*****

CALLING THE BITCOIN BUBBLE BURST (1233 GMT)

With Bitcoin just crashing below 8,000 dollars, it's probably not a surprise that a number

of analysts feel it's now safe to make a call.

"The continuing drop in cryptocurrency prices can probably now be classified as a bursting

of that particular bubble," said Paul Donovan, chief economist at UBS Wealth Management about

five hours ago.

Consensus goes that the crash won't have any macro or systemic impact but then again it

could very well add to the gloominess building up on equity markets.

As Donovan noted, an otherwise confident American consumer could feel somewhat less upbeat

this morning ahead of the U.S. payroll data.

"There is no reason for the U.S. consumer to be concerned at the moment about the state of

things, unless of course that consumer has been so foolish as to gamble on Bitcoin," Donovan

said.

(Julien Ponthus)

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"NO-ONE WANTS TO PUT THEIR NECK OUT THERE ON A SELL SIGNAL" (1219 GMT)

It was a shy kind of a sell signal: BAML's note stopped short of being outright bearish,

examining several potential scenarios including the S&P 500 rising above 3,000, and even

suggesting extraordinary market circumstances may make sentiment signals irrelevant.

As a trader puts it: "I don't see how they can say 'sell signal' when they've been banging

on about it not hitting 8 for months, and then not go through with it... Sums up how NO ONE

wants to put their neck out there on a sell signal."

BAML cross-asset strategists have taken some extra precautions in reaction to the signal.

"Cautious" on the near term, they've rolled over their S&P 500 "fragility hedge".

"We felt that risk reward had deteriorated and that the market could not sustain the pace of

gains. While the modest falls of the last week have started to see some of those overbought

indicators diminish, equity markets remain stretched on most measures we look at," they note.

Yet they're still "constructive" on the longer-term outlook for stocks. Global growth likely

to come in at 4 percent or more should drive earnings to grow by double digits for the year (see

chart).

Responding to clients' pushback to their more cautious stance, they say: "We do not disagree

with the solid fundamentals... It is just when many seem to agree and are quoting our own

arguments back at us, we get a bit nervous."

The BAML cross-asset team's favourite trades in European equities:

- Long European dividend yield stocks

- Long European pharma (valuations at lowest since 2011)

They're also long U.S. banks against the S&P 500, betting on deregulation boosting returns.

(Helen Reid)

*****

EYES ON LEVERAGE AS BOND YIELDS RISE (1059 GMT)

Even (Taiwan OTC: 6436.TWO - news) if rising yields do suggest that growth expectations are increasing, and therefore

could lift equities, there are also implications for investors using leverage, says David Jane,

manager of Miton's multi-asset fund range.

"Higher yields also means higher funding costs for leveraged investors and a higher

opportunity cost for investors in risk assets versus the risk-free return," says Miton's Jane.

"While the economic outlook is highly positive and equity valuations remain reasonable

against a strong period for profit growth, the risk remains that the overblown leveraged trades

need to be unwound as interest rates rise worldwide," Jane adds.

(Kit Rees)

*****

A TIMELY "SELL" SIGNAL (1045 GMT)

In terms of timing, Bank of America Merrill-Lynch's "Bull & Bear" indicator comes at a time

where it definitely won't be overlooked. The fact that it hit a "Sell" signal while European

markets are deep into a fifth consecutive day in the red is food for thought.

"What is for sure is that this indicator comes at a moment where investors are asking

themselves where the market is heading," said Pierre Martin, a senior sales trader at Saxo Bank.

Martin argues that the fast-rising upward trend since the beginning of the year leaves some

space for some technical correction but that at the same time, there is no reason to give up on

the "global synchronised growth" investment case.

(Julien Ponthus)

*****

DECLINE OF THE DAX (0939 GMT)

One of the most impressive reversals in 2018 so far has been Germany's DAX, which started

out the year as a leader among European stock markets, fuelled to a fresh record high by the

cyclicals-led rally, only to reverse violently, dropping more than 5 percent in just eight

sessions. It's now in the red year-to-date.

The euro's relentless rise must be partly to blame for the outsize decline in the

exporter-heavy index, but rising bond yields are also a pressure for the DAX's big defensive

stocks in healthcare and utilities.

(Helen Reid)

*****

SPANISH BANKS' RESULTS "A LITTLE DISAPPOINTING" (0847 GMT)

It's a hefty day for European banking results, and the falls in the share prices confirm the

view from Jefferies analysts that earnings from Spanish lenders Sabadell and Caixabank

are somewhat underwhelming.

"4Q numbers decidedly mixed for both (-ve one-offs at CABK, weaker core trends at SAB), but

the guidance towards a brighter outlook may offer partial support," Jefferies analysts say.

Spanish banks did have a strong year in 2017 so some share price weakness was perhaps to be

expected.

(Kit Rees)

*****

OPENING SNAPSHOT: EUROPEAN SHARES DIP AS BANKING RESULTS WEIGH (0811 GMT)

It looks like day five of straight losses for European shares, with the STOXX 600 index

sliding further in early dealing.

Aside from oil & gas, all other sectors are in negative territory, with the disappointing

results from Deutsche Bank sending its shares 5 percent lower, while Spain's Caixabank and

Sabadell are also among the biggest fallers among banks following earnings.

We could see some volatility ahead of U.S. payroll data.

Here's your opening snapshot:

(Kit Rees)

*****

WHAT YOU NEED TO KNOW BEFORE EUROPE OPENS (0745 GMT)

European shares are set to open flat to slightly lower at the end of a week where rising

bond yields and strength in the euro have pushed the STOXX 600 benchmark down around 1.7

percent.

That is already the biggest one-week loss since early November when a slowdown in earnings

growth and similar bond market jitters weighed. Futures were trading between flat and a fall of

0.2 percent.

Tech stocks will be in focus after U.S. internet giants released their earning updates

yesterday with a record profit at Amazon possibly boosting shares in companies like Zalando (Swiss: OXZALG.SW - news) ,

while shares in semiconductor companies like AMS (IOB: 0QWC.IL - news) , Dialog Semi, and IQE (LSE: IQE.L - news) are expected to open

lower after Apple (NasdaqGS: AAPL - news) issued a light guidance and reported it sold fewer iPhones over the holiday

quarter than Wall Street had expected.

There is a raft of results in Europe too that will keep investors busy. Overall,

fourth-quarter earnings for the STOXX 600 are expected to increase by 11.9 percent year on year,

the latest Thomson Reuters (Dusseldorf: TOC.DU - news) data showed.

Deutsche Bank shares are indicated down 4 percent after the German lender reported a bigger

than expected net loss for 2017, which could test a strong rally in banking stocks seen so far

this year which was fuelled by expectations over tighter monetary policy and strong economic

growth.

(Danilo Masoni)

****

EARLY MORNING EUROPEAN HEADLINE ROUND-UP (0738 GMT)

Lots of earnings today, here's what's jumped out so far:

Deutsche Bank posts third consecutive annual loss in 2017

Spain's Caixabank Q4 profit falls 70 pct from Q3

Spain's Sabadell Q4 net profit more than doubles on one-off sales

Danske Bank (LSE: 0NVC.L - news) beats Q4 pretax expectations, expects lower 2018 net result

Nordea banking group to list Finnish unit on Scandinavian exchanges

Philips Lighting Q4 earnings beat estimates on cost cutting

Tyre maker Nokian Q4 profit up 13 pct yr/yr

Tools maker Husqvarna Q4 result, dividend better than expected

Aker BP Q4 core profit lags market expectations

Fortum Q4 profit jumps 57 pct yr/yr

Tele2 (LSE: 0QE6.L - news) says will aim to grow dividends, Q4 core profit matches forecasts

Hexpol Q4 operating profit matches forecast

Cevian Capital raises Ericsson (Hanover: ERCB.HA - news) stake to 5 pct of votes

Spanish property developer Metrovacesa (Stuttgart: 892583.SG - news) cuts listing price

AirAsia CEO says looking at Boeing (NYSE: BA - news) 787 for AirAsia X fleet growth

AstraZeneca (NYSE: AZN - news) flags return to drug sales growth in 2018

Britain's BT says on track for year after Q3 meets its expectations

Cobham (Other OTC: CBHMF - news) sells communications units to Viavi for $455 million

Doorstep lender Provident Financial (Other OTC: FPLPF - news) names new CEO

Satellite company Avanti appoints new CEO​

EU clearing house system passes stress test

(Kit Rees)

*****

BUT FUTURES POINT TO STEADY OPEN FOR EUROPEAN SHARES (0702 GMT)

Contrary to earlier calls from financial spread-betters, European stock index futures have

opened with slight gains, indicating this week's sell-off could ease somewhat.

The STOXX 600 is down around 1.8 percent so far this week, set for its biggest weekly loss

since November

Here's your snapshot:

(Danilo Masoni)

*****

DEUTSCHE BANK POSTS BIGGER THAN EXPECTED LOSS (0643 GMT)

Banks, recently buoyed by rising bond yields and optimism about economic growth, could be in

focus today after the DAX-listed heavyweight lender disappointed analyst expectations with a

2017 loss of 497 million euros in 2017.

(Danilo Masoni)

*****

MORNING CALL: EUROPE SET TO EXTEND LOSING STREAK (0630 GMT)

Good morning and welcome to Live Markets.

Rising bond yields and a stronger euro are likely to put European shares under pressure for

a fifth day in a row, one day after the export oriented German DAX index fell 1.4 percent - its

biggest one-day loss since early November.

Over in Asia, the euro neared multi-year peaks as talk of policy tightening in Europe and

expectations that inflation is set to gear higher drove up borrowing costs globally, a move that

sparked a sell-off in Asian equities.

Later in the day the focus will be the U.S. payrolls report. "Anticipation is elevated after

a hawkish FOMC meeting... A strong number may increase the probability of four rate hikes this

year," says Credit Suisse (IOB: 0QP5.IL - news) in its investment daily note.

We'll also be keeping an eye on tech stocks here in Europe after results from big internet

companies in the US. "Some anxiety is fuelled by a trend for companies that miss estimates to be

penalized... Facebook (NasdaqGS: FB - news) bucked the trend, forecasting rising ad sales despite a dip in usage.

Apple reported record quarterly revenue and profits after the bell, Amazon’s results easily beat

expectations, but Alphabet (Xetra: ABEA.DE - news) disappointed," adds Credit Suisse.

Back to Europe, here are your opening calls, courtesy of CMC Markets (LSE: CMCX.L - news) .

FTSE100 is expected to open 5 points lower at 7,485

DAX is expected to open 63 points lower at 12,940

CAC40 is expected to open 9 points lower at 5,445

(Danilo Masoni)

*****

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