LIVE MARKETS-ESG is the hottest acronym in town

* European stocks wipe off late morning gains * STOXX 600 down 0.3%, was up as much as 1.1% earlier * Miners, banks top fallers * Bayer and Lanxess gain after divesting chemical park unit * Wall Street slumps at open 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 ESG IS THE HOTTEST ACRONYM IN TOWN (1406 GMT) Asset managers, major corporate firms, stock exchanges, some governments are abuzz about ESG - environmental, social or governance - factors in investing. The ESG theme is catching up fast among investors and STOXX's launch of euro ESG 50 index yesterday is the latest evidence of increased push for responsible investment. The index is similar to the Euro STOXX 50 blue-chip index, but excludes some names involved in "controversial weapons", tobacco producers, or have product involvement in thermal coal. "ESG investing is now mainstream," the index operator says, and adds that this is in response to increased client demand. The ESG index excludes Airbus, Safran, Vivendi, Volkswagen and Unibail Rodamco, from the main STOXX 50 index either due to not having a strong ESG score or due to their involvement in business that doesn't fall within the ESG theme. It replaces those names with Legrand, Deutsche Wohnen, Michelin , Wolters Kluwer and Kone. Acting fast on ESG non-compliances seems to be another major focus for STOXX. The index provider highlights that it was the first index provider to delete VW from its ESG indices. Here's a look at sector/country allocation of the STOXX 50 ESG index: (Thyagaraju Adinarayan) ***** SUBMERGING MARKETS (1327 GMT) A noteworthy milestone for emerging markets. MSCI's widely tracked MSCIEF index, which includes almost 1,200 stocks from 26 developing world countries, is now down for an 11th straight day ahead of what looks like being an unsteady Americas open. If it can't recover before the close, it will be confirmed as the second longest losing streak ever, only exceeded by two 12-day red runs of May/June 2015 when Greece's debt crisis was building to a climax, and before that all the way back in the September of 1990. This time the reason is the U.S.-China trade war of course. The Institute of International Finance said yesterday more than $2 billion had been yanked out of Chinese equities alone in recent days. The MSCIEF is also close to giving up all its gains for the year. (Marc Jones) ***** BACK IN RED (1321 GMT) Markets seem to find it difficult to hold on to gains and in Europe, like yesterday stocks have slipped into negative territory post-noon after a decent rally in the morning. U.S. stock futures seem to be hit harder with the Dow down as much as 0.8%. At one point today, Europe was up as much as 1.1%. The big reversal comes as yields drop to fresh lows with German bund yields deep in negative territory at -60 bps. "There is still some selling pressure, markets are too nervous," a London-based trader says. (Thyagaraju Adinarayan) ***** UK INVESTORS SEEK SAFETY IN BONDS AMID BREXIT WORRIES (1238 GMT) UK investors piled into bonds and shunned equities last month at their fastest pace in some time, data from Calastone shows, the latest fund flow numbers to highlight the scramble for safety as worries about a no-deal Brexit and the slowing economy have grown. Net outflows from UK equity funds hit 1.3 billion pounds ($1.6 billion), the highest since October 2016 while just over 1 billion pounds flowed into bond funds, the data shows. While tracking UK investor flows, the data also mirrors the trend seen across global financial markets in the BAML fund flow survey recently. The size of the drop also suggests uncertainty about Brexit grew as a tough stance towards the European Union by Boris Johnson, who won the contest to succeed Theresa May as PM last month, may have shaken investor confidence. Investors also sold 185 million pounds ($224 million) of their real estate fund holdings in the month, the tenth straight month of outflows and the fifth largest on records going back to January 2015, the data shows. Calastone's data tracks orders placed by UK-based investors for funds domiciled in the UK and its network accounts for about two thirds of UK fund flows. (Josephine Mason) ***** AS THE TRADE WAR DUST SETTLES, HOW TO NAVIGATE SUMMER LULL (0959 GMT) The euphoria over a dovish Fed and a pause in trade tensions, two of the major pillars behind this year's stock market rally, seem like a distant memory after the torrid past few days. On Monday, the MSCI world index had its worst day since Feb 2018 and the S&P 500 has suffered its longest losing streak since October after Trump's shock move on Thursday night to hit China with more tariffs followed by Beijing's move on Monday to allow its currency to devalue. As the dust settles, Morgan Stanley says U.S. and European equity valuations look a little more fair after the sell-off. Tactical indicators like the relative strength index (RSI) are at levels that would typically trigger a short-term rebound, as we're seeing today. Yesterday, the pan European STOXX and euro-zone benchmarks ended the day at around 25, their most oversold reading on a technical basis since October last year. But Morgan Stanley warns in a note that fundamentals remain bad - the bank's equity strategy team is convinced that the S&P 500 forward 12-month consensus estimates remain too high and are likely to fall another 5-10%. Last night, consensus in Europe is now for earnings drop in Q2 and Q3. Also the bank's U.S. market cycle indicator remains in 'downturn', a phase which typically sees bonds outperform stocks and credit, while the recent escalation of trade tensions raises the downside risks to growth significantly. So how should investors trade the new environment that's even more complicated by low liquidity and high volatility over the northern hemisphere summer? Credit Suisse advises clients should buy into any weakness. The more worried investors are on trade, the more they should: 1) focus on services, e.g. telecoms, software and leisure; 2) companies that are positioned to take market share from U.S. brands in China (Adidas, L'Oreal, SEC); 3) focus on more closed economies (India, Russia) It says European cyclicals are discounting PMI new orders of 45 (i.e. a mild recession), and thus it has a small overweight of European cyclicals (but not the U.S.). Growth in Europe as a style looks vulnerable, but not in the U.S. After the sell-off, Morgan Stanley has reiterated its cautious asset allocation, remaining underweight equities and credit, equal weight government bonds and overweight cash. (Josephine Mason) ***** A SENSE OF DEJA VU IN STOCK MARKETS (0949 GMT) European markets have lost close to 4.5% since Trump's latest tariff threat and there is a sense of deja vu in this. We had an almost similar knee-jerk reaction in May, when there was a similar threat. Same sectors and almost the same names saw value being wiped off. Despite a decent recovery today, UBS analysts say "the complexity and political machinations of U.S.-China trade negotiations will likely keep it a persistent issue that alternates between a simmer and boil". A quick look at how some sectors performed 6 days after Trump's threat in May versus 4 trading days after the August threat suggests there has been a sharper move this time but in both cases, the same names underperformed markets. Chart on the worst hit sectors: (Thyagaraju Adinarayan) ***** MINERS: NEGATIVE CATALYSTS (0856 GMT) Miners are not having a great time of late as escalating trade tensions send shivers through the sector and the industry index is trading at fresh 2019 lows with disappointing results from Glencore being the latest drag to the index, which the only one that's missing out on today's rebound in Europe. Core profit at Glencore fell 32% in H1, missing expectations and sending its shares to 2-1/2 year lows, as the company was hit by a collapse in global cobalt prices. Despite the disappointing results Jefferies has kept its 'buy' rating on the stock, saying investors should buy on weakness: "GLEN shares are inexpensive on FCF yield and offer investors leverage to a cyclical recovery in base metals over the next year". Their positive view on Glencore however looks more an exception, with Jefferies having downgraded a number of mining stocks just yesterday as "negative catalysts" emerge. "Following recent developments, including the escalation of trade wars, the devaluation of the RMB, and tightening measures in Chinese property markets, we lower our commodity price forecasts and make several ratings downgrades," they wrote. "A repeat of 2015-16 for mining is unlikely as balance sheets are much improved, but timing of a cyclical recovery has been pushed back ... and a more cautious view is warranted, even after the recent correction in share prices," they added. Indeed, as you can see in the chart, earning forecasts for the basic resources index have suffered a long string of downgrades to reach the most negative since 2016. (Danilo Masoni) ***** OPENING SNAPSHOT: RISK-ON IN EUROPE...FOR NOW (0725 GMT) A risk-on mood is spreading across European shares at the open as investors embark on some bargain hunting and some calm has returned to steady the major bourses after a brutal three-day sell-off in the wake of U.S. President Trump's dramatic decision to hit more Chinese products with more tariffs, escalating the trade dispute with Beijing. Frankfurt's trade-sensitive DAX is up 0.7%, lifted by gains in Bayer and Lanxess after agreeing to sell their chemical park operator Currenta to Macquarie Infrastructure and Real Assets (MIRA). Chip stocks are getting a little lift from decent results from Japan's Renesas, while also benefiting from the brighter mood across sectors most exposed to the U.S.-China spat. STMicro is up 1.1% and AMS is up 1.6%. Banks are falling with investors punishing ABN Amro for its comments on weaker margins, sending shares down 4.3% and hitting their lowest in three years, and Italy's UniCredit is falling 3.3% after it lowered its FY revenue forecast. Lagging the broader market, London's FTSE 100 has given up early gains dragged lower by its miners following Glencore's results and financial services after Legal & General and Standard Life Aberdeen numbers. Glencore's shares are down 3.6% and their weakest since October 2016. The blue-chip index is now flat. Here's your opening snapshot: (Josephine Mason) ***** BEFORE THE OPEN: BANKS, CHEMICALS AND MINERS (0658 GMT) Europe's stock futures are higher this morning, recovering from a bruising three-day sell-off as investors return to riskier assets and seek out bargains amid continued worries about the escalating trade war between Washington and Beijing. The rout wiped more than 5% off the pan European STOXX 600 index since Friday and knocked the benchmark to early June lows. This morning, European stocks futures are up 0.3-0.6%, shrugging off dire industrial output data from Germany. In corporate news, there's a raft of results from the financial services sector and in general the picture looks a little downbeat. Dutch bank ABN Amro delivered an unexpected 1% rise in Q2 net profit to 693 million euros ($777 million), as interest income rose and impairments on bad loans decreased, but dealers see the shares falling 3-5% due to margin pressures. The tone was equally cautious among rivals. Italy's biggest bank by assets UniCredit has cut its revenue target for 2019 due to expectations of lower for longer interest rates, while Germany's Commerzbank saw Q2 net profit little changed from a year ago but said its target for a slight increase in full-year net profit had become "significantly more ambitious". They are seen down 2-3%. In contrast, shares in payments company Wirecard are being buoyed in early deals after raising its 2019 outlook after reporting new client wins, including Germany's ALDI supermarket chains, as it reported a 35.6% gain in core profits in the second quarter. Chemicals M&A may provide some spark to proceedings. German chemical groups Bayer and Lanxess are getting a boost in early deals after agreeing to sell their chemical park operator Currenta to Macquarie Infrastructure and Real Assets (MIRA) for an enterprise value of 3.5 billion euros ($3.9 billion). A report that DuPont is considering a sale of its nutrition and biosciences unit, which supplies everything from soy-based food ingredients to tablet binders, may stir speculation about potential bidders. Other industrial materials companies include DSM, Kerry Group and Givaudan. Swiss drug company Novartis shares are expected to take a hit - seen down 2% - from news that U.S. drug and food watchdog said some data from early testing of its more than $2 million gene therapy Zolgensma was manipulated, although the agency believes the treatment should remain on the market. Glencore shares could fall as much as 5% after its results. UK miners may get knocked by weaker metal and iron ore prices amid worries about damage to demand from China, the world's top consumer of industrial materials, due to the trade dispute. UK utilities and E.ON may get knocked after the German energy group cautioned margins in Britain are getting squeezed just as the UK regulator told suppliers to lower their price caps following a drop in wholesale power and gas prices this year. Some UK headlines: L&G posts 11% rise in H1 operating profit Glencore first-half profit slumps 32% Spirax-Sarco Says H1 Organic Sales Growth Ahead Of Expectations, Profit Drops In Chromalox Standard Life Aberdeen H1 assets up 5% as market gains offset outflows (Josephine Mason) ***** EUROPE IN TENTATIVE RECOVERY (0617 GMT) Europe's stock futures are staging a very tentative recovery from a punishing three-day sell-off that knocked more than 5% of the pan European STOXX 600 index as nervous investors return to riskier assets and seek out bargains amid continued worries about the escalating trade war between Washington and Beijing. Still, Wall Street futures are firmly in the red - down about 0.4%. "We've gone from being hopeful a couple of weeks ago that talks in Shanghai would aid progress towards a deal and the removal of tariffs, to new tariffs, China no longer buying US agricultural goods and the US labeling China a currency manipulator. That's some escalation in a little over a week," says Craig Erlam, senior market analyst UK & EMEA at Oanda. Investors are also digesting comments from the Fed's James Bullard, which suggested that a rate cut in September is far from guaranteed. The market currently sees a 70% chance of another 25 bps cut. (Josephine Mason) ON OUR RADAR: BANKS AND M&A (0558 GMT) Concerns about the health of corporate Europe are deepening as Q2 results season continues (this morning, there's a flurry of bank results). The latest data from I/B/E/S Refinitiv shows analysts now expect companies listed on the pan-European STOXX 600 index to report a drop in earnings in the second and third quarters of 2019, which marks a severe deterioration from just a week ago. If it happens, that would be a prolonged corporate recession lasting at least three quarters (Q1 earnings dropped 2%), the first since 2016. Back to today with a mixed bag of results from financial services companies - Italy's biggest bank by assets UniCredit has cut its revenue target for 2019 due to expectations of lower for longer interest rates, while the country's No. 3 lender, Banco BPM , reported a sharp rise in net profit for the three months through June helped by capital gains and an improvement in core revenues. Dutch bank ABN Amro delivered an unexpected 1% rise in Q2 net profit to 693 million euros ($777 million), as interest income rose and impairments on bad loans decreased. Germany's Commerzbank saw Q2 net profit little changed from a year ago, helped by low taxes, but said its target for a slight increase in full-year net profit had become "significantly more ambitious". Payments company Wirecard has raised its 2019 outlook after reporting new client wins, including Germany's ALDI supermarket chains, as it reported a 35.6% gain in core profits in the second quarter. In M&A, France's CNP Assurances and Italy's Cattolica Assicurazioni are among a series of European bidders looking to submit binding offers for a controlling stake in the insurance arm of Italian lender UBI Banca. In other dealmaking, German chemical groups Bayer and Lanxess have agreed to sell chemical park operator Currenta to Macquarie Infrastructure and Real Assets (MIRA) for an enterprise value of 3.5 billion euros ($3.9 billion). The U.S. Food and Drug Administration said that some data from early testing of Novartis' more than $2 million gene therapy Zolgensma was manipulated, although the agency believes the treatment should remain on the market. Here are your early headlines: Wirecard nudges up 2019 guidance on the back of Q2 momentum HSBC Global Asset Management names Nicolas Moreau as CEO ProSieben Q2 revenues ahead 4% as growth areas offset TV ad slide Munich Re Q2 net profit up 36%, maintains 2019 profit forecast U.S. FDA says some data testing Novartis' $2 mln gene therapy was manipulated Lanxess, Bayer sell chemical park operator to Macquarie for $3.9 bln Commerzbank posts flat net profit in Q2, helped by low taxes EXCLUSIVE-Airbus plans A321 Toulouse expansion in traces of axed superjumbo ABN Amro tops estimates with modest Q2 profit rise Ahold second-quarter underlying earnings hit by April strike Italy's Banco BPM profit jumps on one-offs, improving revenues CNP Assurances and Cattolica among bidders for UBI's insurance arm - sources E.ON's Q2 retail profits slide as Britain continues to weigh Glencore to halt production at world's largest cobalt mine - FT (Josephine Mason) ***** EUROPE PAUSING FOR BREATH (0516 GMT) After yesterday's choppy session, European stocks are expected to recoup some of the recent losses soothed by the gains overnight in Asia and on Wall Street after China's move to fix the yuan at a slightly stronger rate and White House economic adviser Larry Kudlow's comment that President Donald Trump was planning to host a Chinese delegation for talks in September. That allayed fears of a further escalation in the trade war. After a bruising sell-off which saw three straight days of losses, IG financial spreadbetters expect London's FTSE to open 1 point higher at 7,173, Frankfurt's DAX to open 26 points higher at 11,594, and Paris' CAC to open 5 points higher at 5,239. (Josephine Mason) ***** ($1 = 0.8243 pounds) (Reporting by Danilo Masoni, Josephine Mason and Thyagaraju Adinarayan)