LIVE MARKETS-EU elections: London and Rome in the hot seat(s)

* European stocks rise, while U.S. stocks continue to fall

* U.S.-China trade talks ongoing, investors pin hopes on resolution

* Thyssenkrupp set for best day ever as co aims at elevator biz spin-off

* Ambu sinks 20% after CEO quits

* ADP tumbles 10% as privatisation plans jeopardised

May 10 - Welcome to the home for real-time coverage of European equity markets brought to

you by Reuters stocks reporters and anchored today by Helen Reid. Reach her on Messenger to

share your thoughts on market moves: helen.reid.thomsonreuters.com@reuters.net

EU ELECTIONS: LONDON AND ROME IN THE HOT SEAT(S) (1433 GMT)

Two weeks from now Europe will be in the midst of parliamentary elections - running from May

23 to May 26 across 28 countries. Investors are keenly watching the vote, but what impact is it

likely to have on the market?

The elections should only have a limited impact on euro area assets, including the euro - at

least initially - Goldman Sachs' Europe rates and FX strategist George Cole reckons.

But if populists gain more power it will, in the longer term, contribute to a move towards

gradual relaxation of enforcement of fiscal rules, he adds.

And the focus will be firmly on countries with domestic political scenes already in turmoil.

"Historically, EU elections have had the biggest market impact when they provide a

temperature check on national politics," Cole argues.

As such, he reckons the biggest impact will be in Italy and the UK.

"Without any change in the fiscal stance, the risks will rise for Italian debt as the

deterioration of fiscal variables may put public debt sustainability in question," he writes,

saying Italian government bonds should continue to underperform Spanish and Portuguese bonds.

Meanwhile in the UK the vote will provide an important reading of the nation's mood, and

will likely be an outlet for protest votes (both anti- and pro-Brexit).

"A strong showing of the newly-formed Brexit party could lead to a perceived hardening of

the UK electorate's position on Brexit, implying downside risks for sterling," Cole writes.

(Helen Reid)

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NOT IN THE SAME BOAT? (1336 GMT)

It's quite unusual to see European stocks holding onto gains (+0.6%) in defiance of pressure

from Wall Street where U.S. stock futures (-0.5%) are sliding. It's worth noting is the

trade-sensitive German DAX index is outperforming the broader markets.

The resilience in Europe has taken many by surprise.

"Considering that there has still been no real resolution from the U.S. and China, today's

bounce seems a bit out of kilter," says John Woolfitt at Atlantic Markets.

Another UK-based trader says gains in Europe caught him "wrongfooted" as he expected a sharp

sell-off after tariffs kicked in. The U.S. move has after all fueled expectations that China

will retaliate.

Still, European markets sold off harder earlier this week on concerns the trade dispute

would erupt into a full-blown war.

So is Europe playing catch-up given its underperformance against U.S.?

Not quite.

Stephane Ekolo at Tradition says that's what the market participants are believing given

depressed valuations, but he expects Europe to start underperforming U.S. again.

The 12-month forward price-to-earnings ratio of European stocks is well below their 5-year

average (see below).

The pan-European STOXX 600 index, which is taking its cue from a strong rally in

China overnight, gave up some gains around midday after U.S. President Donald Trump tweeted he

was in "absolutely no rush" to finalise a trade agreement with China.

But a glance at sector and company moves also helps explain the gains.

Firstly, Thyssenkrupp is soaring about 20 percent and on track for its best day since its

listeng almost 30 years ago after its elevator spin off plan.

And there has also been big reshuffle in sectoral performance since this morning: the autos

index has slipped into red from being one of the best gainers in early deals, while the

utilities index is now up 1.1%, slowly crawling to the top and clearly showing investors are

going defensive.

Wall Street is set for its fifth straight days of losses and both Europe and U.S. on track

for their worst week since late December. STOXX 600 is set to shed 3% for the week.

(Thyagaraju Adinarayan)

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AS BOND YIELDS SINK, STOCKS MAY BE THE ONLY PLACE TO HIDE (1114 GMT)

There's been a lot of head scratching about what's fuelled this year's stock market really.

It's happened without much enthusiasm - BAML data this morning shows the unrelenting exodus from

equities continues.

The early relief that the world economy isn't about to crash wore off by late January and

the market has digested the Great Central Bank U-Turn of March 2019 with expectations for

lower-for-longer interest rates.

Investors still seem unconvinced about market direction, stuck amid uncertainty of trade

disputes, global economic growth and corporate health.

And yet stocks are grinding higher. This morning, European equities are shrugging off the

trauma over derailed trade talks that shook markets earlier this week and the STOXX 600

is up 0.9 percent, set for its best day in a month.

So how to explain the market's apparent resilience?

Christophe Donay, head of asset allocation at Pictet Wealth Management, sums it up well:

"(Investors) don't see any place to hide."

German bond yields are in negative territory and even appetite for the stalwart U.S.

Treasuries appears to be waning with the dismal 10-year auction earlier this week.

Donay is "cautiously optimistic" about equities - he has a neutral stance on developed and

emerging market equities except for Asia, where he sees particular strength due to Beijing's

pledges to shore up China's economy and markets.

Overall macroeconomic conditions aren't "fantastic", but he doesn't expect a global

recession any time soon (unless there was a massive shock) and interest rates will stay lower

for longer.

So far so good... except that this year's rally has left valuations in the U.S. and Europe

looking stretched and that's likely to keep gains limited for now. See the chart below: Donay

says they are two points above historical averages.

"There's no leeway to expand valuations because the link between macro fundamentals and

equity market valuations is earnings growth and that is sluggish, especially in the U.S.," he

says.

His stance illustrates investors' current dilemma. Without a catalyst like improving

earnings, markets may continue treading water for a while longer.

(Josephine Mason)

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IT'S THE DIVIDENDS, STUPID! (0918 GMT)

Are you worried about the southerly direction markets are taking? Even after today's bounce,

the STOXX has not recovered all yesterday's losses.

Worry no more, Citi's global strategy team says. They've found one answer to the "insatiable

search" for a single factor to explain market movements.

It's simple! Markets follow dividends.

They argue global stocks are up 7% per year since 2010 because that's been the growth in

global dividends.

"Over the next two years, global equities will track dividends 13% higher if their close

relationship holds and consensus dividend forecasts are right," write Robert Buckland and team.

You can see that close relationship in the chart below.

According to Citi's model, Japan and the UK offer the best returns currently, with cheap

valuations relative to their dividend yield.

(Helen Reid)

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OPENING SNAPSHOT: STRONG BOUNCE, THYSSENKRUPP SOARS, AMBU AND ADP SLUMP (0719 GMT)

As expected, European stocks are staging a strong bounceback with the DAX up 1% and the

pan-European STOXX up 0.8%. Trade-sensitive tech, mining, and autos stocks are in the lead.

If it keeps this pace up the STOXX 600 will seal its best day since April 3 - which really

says more about how little volatility there's been in the market than how confident investors

are feeling today.

Germany's Thyssenkrupp soars 7.5%, topping the European indices after sources told Reuters

the company is considering a holding structure and plans to carve-out or list its elevators

business. It also expects a joint venture with Tata Steel to fail.

A few other eye-catching moves on the stock front: Danish medical equipment maker Ambu is

sinking 12% after its CEO resigned.

French airport operator ADP is stealing the spotlight with a 7.4% drop, extending its falls

from yesterday when it tumbled nearly 6% after the constitutional council approved plans for a

referendum that could delay or block the government's plans to sell shares in the company.

The stock hit its lowest since Nov 2017 in early deals.

London-listed platinum miner Lonmin is down 6.1%, bottom of the small-cap index, after it

warned delays in a takeover by Sibanye-Stillwater would hurt sales. Thomas Cook Group meanwhile

is near the top of the same index, up 3.5% after Sky reported Virgin Atlantic has put in an

offer for the ailing tour operator's long-haul business.

British Airways owner IAG meanwhile is up 4.2% after its results were in line with

expectations.

(Helen Reid)

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WHAT'S ON THE RADAR: A BOUNCEBACK, SPRINKLED WITH MIXED RESULTS (0646 GMT)

A bounce in Chinese stocks and the yuan was spreading to Europe on Friday with futures

indicating gains of 0.8 to 1.2 percent for the main regional benchmarks, and Germany's

trade-sensitive DAX leading the way.

Investors in China and Europe seemed to be looking past the tariff hike on $200 billion of

Chinese imports kicking in and instead focusing on ongoing trade talks between the U.S. and

China in Washington.

As a trader pointed out it’s also been "a rough week" for the markets with Europe especially

bruised. The STOXX 600 was on track for its worst week in seven months – since the sharp

sell-off in early October.

Mixed results from companies including Natixis, Moncler, Lonmin, and Tod's will keep stock

trading busy.

French bank Natixis delivered stronger Q1 profits and traders saw it rising slightly (1

percent) after its core capital buffer measure rose.

Tod’s shares were seen falling 3-7 percent after the Italian fashion group’s chief financial

officer said current consensus expectations are “a bit challenging” in terms of revenues and

profitability.

Luxury peer Moncler delivered a positive outlook, helping its shares up 1 percent in

pre-market.

Platinum miner Lonmin was expected to fall 2-5 percent after it warned full-year sales would

be at the lower end of its target range.

Kering also announced it agreed to pay a record 1.25 billion euros to settle a dispute with

Italian tax authorities centred on its brand Gucci. Traders saw the stock rising around 1

percent though after the settlement.

A Sky report that Virgin Atlantic offered to buy Thomas Cook’s long-haul airline business

earlier this week was seen as a small positive for the battered stock (down 31 percent

year-to-date).

And AB InBev was seen inching up 0.5 percent after sources told Reuters its Asia business

has filed for a Honk Kong IPO of at least $5 billion.

(Helen Reid)

*****

EUROPEAN FUTURES JUMP AS YUAN AND CHINESE STOCKS RECOVER (0621 GMT)

Futures are up quite strongly across the board in Europe, rising 0.6 to 0.8 percent in early

trade.

What could be the reason for this? Is it a classic "sell the rumour, buy the fact" move

after a tariff hike was priced in by the market?

A trader notes it's "been a rough week for the markets," and says "I assume there's a belief

that U.S. following through with tariff increase will put more pressure on Washington and

Beijing to come to some sort of agreement".

It's certainly the case that European stocks have reacted more violently than the U.S. to

the renewed tariff threats, as we mentioned yesterday, and a strengthening in Chinese shares and

the yuan is likely also rubbing off on the region.

Chinese domestic investors are looking to continuing U.S.-China talks for signs of hope.

Societe Generale economists reckon the impact on China's growth from the tariff hike will be

"manageable" at 0.2 to 0.3 percentage points, though "lingering uncertainty may trigger

policy response".

Here are some of the UK headlines to watch - and GDP figures will be an important data point

today:

Virgin Atlantic bids for Thomas Cook long-haul unit, Sky reports http://bit.ly/2VsiJdd

BA-owner IAG reiterates flat profit guidance after in-line results

Brewin Dolphin Holdings Posts 12.9% Fall In HY Statutory Pretax Profit

Millennium & Copthorne quarterly profit, room revenue fall

(Helen Reid)

*****

EYES ON DEUTSCHE POST, NATIXIS, ALTICE, MONCLER AS INVESTORS WEIGH TRADE RISK (0601 GMT)

The tariff hike and China's threat of retaliation has left traders and investors guessing as

to what might come next.

"As well as its own tariffs there are fears of a go-slow on customs inspections and other

disruptive behaviour could further disrupt trade," writes a trader in a morning note.

"Any hope of a breakthrough before goods exported today by China land in the U.S. in 2-3

weeks when effectively the tariffs kick in?" asks Chris Bailey, strategist at Raymond James.

Results this morning from Deutsche Post and yesterday after-hours from Natixis, Moncler,

Altice and Tod's will keep stock trading busy.

Kering also announced it agreed to pay 1.25 billion euros to settle a dispute with Italian

tax authorities centred on its brand Gucci. The settlement is the highest ever agreed by a

company with Italian tax authorities.

And sources tell Reuters AB InBev's Asia business has filed for a Honk Kong IPO of at least

$5 billion.

Here are your early headlines:

Deutsche Post profit jumps, helped by Chinese supply chain deal

AB InBev's Asia business files for Hong Kong IPO of at least $5 bln-sources

France's Natixis takes stake in Australian resources M&A adviser

Air France KLM's April passenger numbers up 9.2 pct from last year

Gucci owner Kering agrees record Italian tax settlement

French retailer Casino reviewing options for Latin American assets

Altice Europe hails strong French market, says turnaround materialising

Moncler sees H1 profitability broadly in line with same period of 2018

Tod's faces "challenging" expectations on 2019 results-CFO

(Helen Reid)

*****

EUROPEAN STOCKS TO RISE AS TRADE TALKS CONTINUE, TARIFF HIKE KICKS IN (0529 GMT)

Europe's main stock indices are set to climb this morning despite Trump's tariff increase on

Chinese goods kicking in. It seems investors are looking through this (which was arguably

already priced into markets) and encouraged by the White House saying the two sides will resume

negotiations this morning in Washington.

After the worst day for the STOXX 600 in seven months, it's not surprising spreadbetters see

a slight recovery as likely. S&P 500 futures are down, however, indicating Europe's rise may be

short-lived.

U.S. stock futures fell and Asian shares pared gains on Friday after U.S. President Donald

Trump's tariff increase on $200 billion worth of Chinese goods took effect, ratcheting up

tensions between the world's two biggest economies.

Financial spreadbetters expect London's FTSE to open 22 points higher at 7,229, Frankfurt's

DAX to open 51 points higher at 12,025, and Paris' CAC to open 29 points higher at 5,343.

(Helen Reid)

*****

(Reporting by Helen Reid, Danilo Masoni, Josephine Mason and Thyagaraju Adinarayan)