LIVE MARKETS-End of the love-in for Berkeley Group?

* STOXX 600 down 0.1% * Hopes of trade deal, dovish Fed limiting losses * Saga sinks as tour operator warns on Brexit June 19 - 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: thyagaraju.adinarayan.thomsonreuters.com@reuters.net END OF THE LOVE-IN FOR BERKELEY GROUP? (1112 GMT) The feel-good factors - mainly better-than-expected results and its dividend policy - that boosted Berkeley Group's shares at the open evaporated pretty quickly as lingering worries about the troubled sector returned. The stock is now down 1.3%, reversing the 5% rally in early deals and dragging its rivals with it. Some of the positive surprise was already baked in as the company often beats its own estimates, Chris Millington, equity analyst at Numis Securities, says. But the other reason is that the market's expectations for FY earnings may finally be crashing back down to reality .... or rather to levels more inline with the company's own guidance, leaving the stock looking a little pricey compared with its peers. The company has outlined its expectations for lower earnings previously, "but the market doesn't seem to believe it," says Robin Hardy, analyst at Shore Capital. "There's a permanent love-in for this stock," he says even though Redrow shares, for instance, are trading at around 7 times its earnings compared with Berkeley at more than 10 times. Millington agrees. "If this was outside the housebuilder sector, this would look screamingly cheap," he says. "You've got a company with £1 billion of cash on the balance sheet, returning 6% a year and trading at under 10 times with an amazing asset base." "But given it sits in housebuilders where I can see PE ratios of sub-6 and dividend yields of 12%, Berkeley does look expensive relative to the others." And then there's the general malaise across the sector to digest as uncertainty over Brexit continues to knock prices and curb buyers' appetite for new homes. The chart below highlights the big gap in valuations between Berkeley and its peers: (Josephine Mason) ***** WHATEVER IT TAKES 2.0? (1048 GMT) Was the market right in taking ECB President Mario Draghi's words at face value yesterday? As Silvia Dall'Angelo, economist at Hermes Investment Management, points out, Draghi only had three months left until his term expires and he won't be able to get any commitment from his successor that they will continue in the same vein. "I'm a bit surprised by the reaction in equity markets... I'm not really sure we can take [Draghi's] promises at face value," she said in an interview yesterday. The impact of QE on financial markets, and inflation expectations in particular, has faded over time - the "law of diminishing returns", as she puts it - and thus a new round of cuts or stimulus would likely be less powerful than previous rounds. As you can see below, Draghi's words alone did give a significant boost to long-run inflation expectations which had just recently hit a record low. But in terms of supporting the economy, many investors are less than certain stimulus will deliver a sufficient impact. "Given the weak data across Europe, political and financial difficulties involved in implementing stimulus and likelihood of this being part of a global shift towards easier policy we are retaining our underweight positioning to European Equities in the short term," says Edward Park, deputy chief investment officer at Brooks Macdonald. "We wouldn't call it a 'whatever it takes' moment," says Donough Kilmurray, managing director of investment strategy at Goldman Sachs Investment Strategy Group. "That was a much more severe crisis period and a much more significant intervention by Draghi." Today the baton passes to the Fed as central banks race to be the most dovish. (Helen Reid and Dhara Ranasinghe) ***** OPENING SNAPSHOT: SUBDUED START AHEAD OF FED (0726 GMT) European stocks are slightly lower with banks, mining and auto sectors making gains, while defensives such as consumer staples and utilities are in red. A build-up to Fed? After Draghi's dovish comments yesterday, hopes are running high for the Fed to follow suit later this evening. Chip stocks are rallying today pinning hopes on a potential China-U.S. trade deal. Siltronic is making a solid come back with 4% gains, a day after sliding 7% yesterday on its profit warning. British housebuilders are among top gainers today with Berkeley Group leading the pack after its annual profits comfortably beat estimates. Berkeley is rising 3.4% and is the top gainer on FTSE 100. Just East is off 4.5% and the biggest faller on the UK blue chip index after UBS downgraded the stock to "neutral". As expected, Saga shares are sliding 7%, hitting all-time lows after the company says its tour operations still being hurt by UK political uncertainties. Here's your opening snapshot: (Thyagaraju Adinarayan) ***** WHAT'S ON OUR RADAR: SAGA, BERKELEY, STEINHOFF, ADYEN (0656 GMT) It's a lull in continental Europe, but there is some action in the UK with corporate companies continuing blame Brexit and/or political uncertainties for poor results. What's the impact? Saga says its tour operations business is still being hit by political uncertainties, housebuilder Berkeley Group has reported a 21% drop in pretax profit and Whitbread's like-for-like revenue per available room in the UK fell 6% in Q1. Traders are calling Saga and Whitbread shares 2-3% lower, while Berkeley shares are called 2-5% higher as their results comfortably beat estimates. The Berkeley share move could be a positive read-across and provide some relief for the battered British housebuilding sector. Steinhoff International's Frankfurt-listed shares are seen falling as much as 10% after the South African retailer reported a 1.2 billion euro ($1.34 billion) loss for 2018, in a much-delayed earnings report, revealing the impact of an accounting fraud put at $7.27 billion. Dutch fintech firm Adyen seen 2% down after some pre-IPO investors placed shares at 670 euros -- a 3% discount to yesterday's closing price. UK headlines: UK housebuilder Berkeley annual profit slumps Brexit uncertainty hurts demand at Whitbread UK's Saga warns on hit to tour operations (Thyagaraju Adinarayan) ***** CALM AFTER THE STORM (0619 GMT) European stock futures indicate a flat open after a massive rally yesterday as investors are on the side-lines waiting to see if the Fed follows in the footsteps of the ECB. Meanwhile, for anyone still recovering from the Draghi shock, you're not alone: ECB policymakers were divided on Tuesday, with some feeling powerless, after Draghi hinted at new stimulus measures that had yet to be discussed by the ECB's Governing Council. Corporate news looks very light this morning but it would be interesting to watch if the trade-sensitive stocks continue to rally pinning hopes on a trade deal when Trump and China's Xi meet in G20. The Philadelphia Semiconductor index rose 4.4% overnight on hopes of a trade deal. A report that Deutsche Bank chief Christian Sewing is planning a major overhaul of top management, including replacing the finance chief, is making big headlines. Key headlines: EXCLUSIVE-Left in the dark, ECB policymakers divided on stimulus options Dish Network nearing $6 bln deal for T-Mobile-Sprint assets Scandal-hit Steinhoff posts narrow $1.3 bln loss in delayed 2018 results Qantas adds 10 Airbus jets to order, will take 36 A321XLRs (Thyagaraju Adinarayan) ***** EUROPEAN SHARES SEEN SLIGHTLY HIGHER (0528 GMT) European stocks are seen extending gains after a solid rally on Tuesday. All eyes are on Jerome Powell now as the market is keenly watching if he will follow the lead of his European counterpart Mario Draghi and open the door to future rate cuts at the policy meeting later in the day. The Fed is scheduled to release a statement at 1800 GMT on Wednesday, followed by a press conference by Powell shortly after. Financial spreadbetters IG expect London's FTSE to open 10 points higher at 7,453, Frankfurt's DAX to open 11 points up at 12,342, and Paris' CAC to open 4 points higher at 5,513. (Thyagaraju Adinarayan) ***** ($1 = 0.8934 euros) (Reporting by Danilo Masoni, Helen Reid, Josephine Mason and Thyagaraju Adinarayan)