LIVE MARKETS-Earnings still matter... but only for single stocks

* STOXX 600 down 0.15% after positive start * Dollar spike, HK protests weigh * Miners top drags; FTSE 100 down 0.1% * Osram rallies, AMS sinks after Austrian firm preps counterbid * Investors welcome new ABB CEO, shares rise * Wall Street fall as trade war stokes recession fears Welcome to the home for real-time coverage of European equity markets brought to you by Reuters stocks reporters and anchored today by Josephine Mason. Reach her on Messenger to share your thoughts on market moves: rm://josephine.mason.thomsonreuters.com@reuters.net EARNINGS STILL MATTER.... BUT ONLY FOR SINGLE STOCKS (1452 GMT) With markets hostage of political and economic uncertainty it would perhaps be too much to pretend a better-than expected reporting season to support equities. Sure, the bar has been lowered, but both sales and earnings have beaten expectations, and that appears to mean something when you look at single companies. "It is reassuring to see that despite the macro concerns over U.S./China trade tensions and sharp falls in global bond yields, earnings still matter for individual share prices," say UBS strategist led by Nick Nelson. "Companies that have beaten earnings estimates have seen the best relative performance for 7 quarters," they add. This UBS chart nicely illustrates the reaction. More broadly, according to UBS data weighted by market cap, a net 24% of companies have beaten expectations on sales (long-run average of 10%), while a net 15% have beaten them on earnings (average of 18%), highlighting some margin pressure. With more than 420 companies in Europe having reported so far, we are three-quarters of the way through the season: there are 40 companies expected to report this week, down from the last week's 77 and the peak of 154 in the week before. (Danilo Masoni) ***** ITALIAN ASSETS? "UBER-BEARISH POSITION OFFERS LITTLE ADVANTAGE" (1221 GMT) Italy's bonds and banks are going through another hot summer and investors are gearing up for fresh rounds of volatility ahead as election risk is back on their radar screens. Still being overly bearish may not turn out to be the right strategy, according to Andrea Iannelli, investment director, fixed income at Fidelity International. "With most European government bonds offering negative yields, Italian BTPs can be attractive to income-starved investors, at the right price. Compared to previous episodes, the underperformance of BTPs may be less pronounced this time around, and we would look to pare back our underweight should spreads widen further than we expect," he says. And on banks, which are highly sensitive to politics given their large holdings of sovereign debt, Iannelli also sees possible opportunities, especially among the big, more solid lenders. "For Italian national champion banks, the implications of wider BTP spreads on their capital position is less pronounced than in the past. The two largest banks have right-sized their BTP holdings... thus reducing the sensitivity of the Core Equity Tier 1 ratio. Moreover, the big banks have offloaded a large share of their non-performing loan exposures in the past year, further reducing risks to their capital position," he adds. Iannelli says even though populist rhetoric is set to rise in election campaigns with fiery confrontations with the EU on budget issues, he expects Italy will likely soften its approach and propose a feasible compromise. "An uber-bearish position offers little advantage for investors," he concludes. Italy's banks have fallen to their lowest since September 2016 as the sudden political crisis pushed the Italian/German bond yield spread to end-June levels. (Danilo Masoni) ***** HOW TO BUILD YOUR WAY OUT OF RECESSION (1045 GMT) Credit Suisse has taken a look at what stocks would benefit from a rebound in construction and infrastructure spending if governments were forced to spend their way out of recession. * Construction spending is 7% and 13% below its norm in Europe and the U.S., respectively but construction confidence is at record highs in Europe, implying about 4% growth in construction spend. * There's a shortage of public infrastructure - in most developed economies, public infrastructure investment is about 30% below its norm. * The fall in bond yields has meant governments have more fiscal leeway. The bank estimates Germany could increase spending by about 5% of GDP before government debt to GDP rose. * "The key is that if there is a recession, real rates need to fall by 5pp, but can't. The only alternative we see is central banks directly financing spending," the bank's strategists say. * The rising political force of Green parties will also likely push for additional money to be spent on projects that reduce CO2 (railways, insulation, renewables). So how to play this? Infrastructure- and construction-related names that look cheap based on its analysis and have had positive earnings revisions include Ingersoll-Rand, Schneider and LafargeHolcim. Cement companies also look cheap on a book-to-value basis, and they also recommend looking at construction-exposed capital goods companies with an energy efficiency angle, such as Schneider, Halma and Acuity. More broadly, analysts have upgraded their earnings estimates on the STOXX Construction and Materials index for most of the time during the past 6 months, as you see below. (Josephine Mason) ***** A FEW MORE WEEKS OF SLIDING MARKETS? (0901 GMT) JP Morgan thinks so and says investors should get ready for a few weeks more of stock market weakness. Perhaps the fast evaporation of today's early gains just highlights how markets remain fragile given the high uncertainty over trade and macro. "At the overall market level, while we remain positive on stocks for the year, we are in the short term advocating a pullback, lasting perhaps a few weeks, similar to the May experience, of a high-single-digit weakness," say strategists at the US bank led by Mislav Matejka. "Our tactical market concerns revolve around poor August seasonals, elevated HF beta entering the month, some complacency seen in sentiment indicators, elevated DXY and the renewed trade uncertainty," they add. Matejka and team say there are two additional catalysts to look forward to into September: 1) ECB restarting QE 2) Second Fed cut and perhaps some ceasefire on the trade front (Danilo Masoni) ***** SPOKE TOO SOON... (0853 GMT) We were just struggling to describe the move higher today with little newsflow but before we did that the rally is already on its way to death. What looked like a solid rebound a little over an hour back is now fading fast with miners pulling the FTSE 100 into red, while STOXX 600 is up just 0.1%. Dollar spike is hitting miners, while worsening Hong Kong protests are hitting risk sentiment among investors. Markets are a bit of a "conundrum" this morning, a trader says, adding that the dollar spike being led by euro weakness seemed to be the catalyst for the shift in sentiment. "Feels very macro." Markets had opened more than 0.8% higher with broad-based gains, but stronger dollar in the last hour has pulled mining names lower with the STOXX basic resources index just shy of hitting fresh YTD lows. Another London-based trader says Hong Kong headlines are "denting sentiment". The Asian financial hub has been grappling with anti-government street protests in recent months; the airport authority cancelled all flights for rest of the day. (Thyagaraju Adinarayan) ***** RISK IS BACK ON IN EUROPE (0730 GMT) European stocks are bouncing back this morning as investors make a tentative return to riskier assets in search of bargains, giving stocks across the board a lift. Technology, chemicals, financial services and healthcare sectors are leading the gains. Dealmaking, results and exec hires are moving individual shares, with Osram Licht hitting their highest in more than four months after AMS said it was ready to make a counterbid for the German lighting company. AMS shares are down 10.1%. Tullow Oil is leading the pan European STOXX 600 after making a major oil discovery in the Orinduik block in Guyana, raising expectations it will move to develop a field in the oil-rich South American country. ABB, up 3.9%, is the top gainer on the blue-chip board after the Swiss-Swedish robotics and engineering group snared Sandvik's chief exec as its next CEO. (Josephine Mason) ***** EUROPE STAGES REBOUND (0642 GMT) European stock futures are staging a pretty decent rally this morning, recovering from two straight weeks of losses even as investors continue to worry about the U.S.-China trade spat with no sign of a truce in sight and renewed political turmoil in Italy. Taking their cue from gains overnight in China (Japan, India and Singapore are closed for holidays), the Eurostoxx and DAX front-month futures are both up 0.8%. On the corporate news front, AMS is lighting up the M&A market. In a bid to reduce its dependency on Apple and betting on growing demand for technology for self-driving cars, the Austrian sensor specialist has triggered a bidding war for Osram on Sunday, saying it was ready to pay 10% more for the German lighting group than finance investors Bain Capital and Carlyle have already offered. Inline with that counterbid, Osram shares are up 10%, while AMS shares are down as much as 6.7% in premarket trade, according to Julius Baer. Analysts have previously questioned Osram's strategic fit with AMS given its exposure to the struggling automotive market. In exec moves, ABB shares are expected to get a boost from news the Swiss-Swedish robotics and engineering group has wooed Sandvik's chief executive officer Bjorn Rosengren as its next CEO. Sandvik shares are seen coming under pressure from the loss of the chief who has a reputation for being ruthless with underperforming divisions, dealers say. Shares in National Grid, which owns the electricity and gas transmission system in England and Wales, may draw scrutiny after Ofgem threatened the utility with a possible fine after almost a million UK businesses and homes suffered power cuts on Friday. Here are your early headlines: EXCLUSIVE-PSA, Dongfeng to drop two China auto plants, halve workforce -document Sensor specialist AMS triggers bidding war for Germany's Osram Sandvik Chief Executive Rosengren to step down and join ABB as CEO SSE confirms it is in talks with OVO to sell energy retail business RBS to appoint Alison Rose as CEO in coming weeks - Sky Woodford tops list of UK All Companies fund laggards - report ING reviews euro bond business, ends Belgian dealing Thomas Cook in advanced talks for further 150 mln pound capital Salzgitter H1 After-Tax Result Down At 96.4 Million Euros Altran directors back tender offer in previously announced CapGemini takeover deal (Josephine Mason) ***** STEADY IN EUROPE (0528 GMT) After closing out their second week of losses amid fresh political turmoil in Italy and U.S.-China trade tensions, European stocks are expected to recover somewhat this morning taking their lead from gains in Asia overnight. Holidays in Japan, India and Singapore have kept trading activity muted overnight. IG financial spreadbetters expect London's FTSE to open 34 points higher at 7,288, Frankfurt's DAX to open 64 points higher at 11,757, and Paris' CAC to open 26 points higher at 5,354. (Josephine Mason) ***** (Reporting by Danilo Masoni, Josephine Mason and Thyagaraju Adinarayan)