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LIVE MARKETS-Europe ends another positive quarter on a high

* European end higher after choppy, low-volumes session * STOXX 600 +3.6% in Sept, marks 3rd positive quarter in a row * JPM raises euro-zone stocks to "overweight" * ECB's Draghi emphasises need for fiscal push - FT * Wall Street opens higher 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:// EUROPE ENDS ANOTHER POSITIVE QUARTER ON A HIGH (1559 GMT) The last day of September and Q3 saw choppy trading and low volumes but a JPMorgan upgrade of euro-zone stocks to overweight on ECB stimulus expectations gave another boost to sentiment, helping offset concerns over the slowing economy and an earnings recession. The pan-European STOXX 600 index rose 0.35% at 393.2 points - its highest closing level since May 2018 - and euro zone stocks rose 0.5%, while other country benchmarks except the UK's FTSE 100 also posted slight gains. In September the STOXX 600 and the Euro STOXX both rose nearly 3.6%, marking their third consecutive positive quarter. (Danilo Masoni) ***** EUROPE'S INVESTMENT BANKS: A "SLUGGISH" Q3 (1520 GMT) The reporting season is just around the corner and it doesn't look like it's going to be a great sight for European investment banks. Analysts at Credit Suisse led by Jon Peace have just made some minor downgrades to their European investment bank forecasts to reflect what they say is seen as a "sluggish" Q3. "Trading has faced headwinds from low client activity, IBD revenues are generally tracking below US peers, and lower rates are weighing on net interest margins," they say. Data from Dealogic cited by Credit Suisse points to lower investment bank revenues at all institutions in Europe with two exceptions (Barclays and BNP). RBS, Deutsche Bank, Credit Agricole, HSBC are all seen posting declines of more than 10%, while the expected declines at Societe Generale, UBS, Credit Suisse and Natixis exceed 20%. As a whole, European banks - under pressure from negative rates and a slowing economy - have suffered 22 straight months of earning downgrades, as you see in the chart below. After posting growth in 2018, their earnings are expected to fall 3% this year. (Danilo Masoni) ***** EURO ZONE: WHO SAYS NEGATIVE RATES DON'T MAKE BUBBLES? (1459 GMT) Looking at the euro fall today to its lowest in over 2 years on gloomy growth prospects and all but tepid inflation, it would be tempting to argue that negative rates are doing little to prop up the euro zone. There's a sweet spot however where Draghi's medicine seems to be effective and that's real estate. According to the UBS Global Real Estate Bubble Index 2019, "imbalances have soared particularly in the Eurozone, with Frankfurt and Paris the two most prominent new additions to the bubble risk zone when compared with last year". "In parts of the Eurozone, low rates have still helped to push real estate valuations into bubble risk territory", wrote Mark Haefele, Chief Investment Officer at UBS Global Wealth Management. With that in mind, it's not surprising to see European listed real estate outperform the overal market with a 0.9 percent rise, roughly double that of the STOXX 600 this afternoon. (Julien Ponthus) ***** AN UNEASY FEELING OF DEJA VU (1348 GMT) The markets are looking eerily similar to this time last year as Q4 approaches and Morgan Stanley's equity strategist Michael Wilson says he's got a feeling of deju vu. The S&P 500 is near its all-time high at 3,000, the MSCI emerging market index is 15% below its highs and the Eurostoxx is 7% - pretty much where they were a year ago. Anyone thinking that the new highs for the U.S. market are evidence of a resurgent bull market is amiss as the risk of recession has increased materially, he says. The other reason to be wary: the recent failure of WeWork to go public is also reminiscent of past corporate events marking the peaks in powerful secular trends. Others include United Airlines' failed LBO in 1989, which ended the high yield/LBO craze of the 1980s; the AOL/Time Warner merger in Jan 200, bringing the Dotcom bubble to a close and JPMorgan's deal with Bear Stearns in March 2008, signalling the end of the financial excesses of the 2000s. Wilson says the switch out of growth stocks which have fuelled the decade-long bull-run and into more reliable defensive stocks that started in July also shows the market is pricing in a recession. "In short, we're moving from the perception that this is late cycle to a belief that it's end of cycle," he says. To take advantage of the new trend, which he believes still has legs, Wilson recommends a long defensive/short secular growth stance. In previous most recent rotations in late 2015/early 2016 and Q4 2018, the defensive cohort outperformed secular growth by 25%. So far, the outperformance has been about 12%, about half of what he expects to see before the rotation is over. Secular growth stocks represent companies that can grow both profits and revenue materially above average and that growth is not dependent on robust broader economic growth. The chart below shows how the MSCI Europe value factor index has outperformed the momentum factor index by 1.4% since the start of August. The other major issue that could derail European equities' stellar rally this year is earnings estimates for the year ahead. Analysts and strategists agree that the consensus for 10% EPS growth for 2020 is unrealistic and some caution that cuts to forecasts could sour the mood and kick off another Q4 rout. After 2018, that will feel very familiar. (Josephine Mason) ***** MODEST CLOSE TO EVENTFUL QUARTER (1121 GMT) For such an eventful quarter and month, markets are closing out on a rather lacklustre note as investors digest the latest news on the U.S.-China trade spat and generally positive China data. Major indices are stuck in a narrow range that's teetering in and out of negative territory - the pan European STOXX 600 is currently flat, with traders attributing the directionless activity to low volumes while some investors indulge in some window-dressing ahead of the quarter end. Volumes are about a quarter below the average, with Rosh Hashanah, Jewish New Year, limiting activity levels, says one trader. It may be like this all week with China out for the rest of the week before the official U.S.-China negotiations start next week. "It seems every time we take a step forward with the trade war and optimism rises ahead of a meeting between the two teams, we get some negative headlines," says Craig Erlam, senior market analyst UK & EMEA at Oanda. "We are becoming used to threats ahead of these talks, but any follow through here would be rather dramatic." Beaten-down banks, rate-proxy real estate stocks and defensive sectors like utilities are leading the gains, extending this month's trend as investors scoop up the laggards of the year. One notable outperformer among indices is also one of the region's top underperformers for the year: Madrid. The Spanish blue-chip is set for a near 5% rise this month, which is helping offset the losses earlier in the year and putting it on track for 3% rise year-to-date. The chart below shows the ranking for the individual bourses year-to-date: (Josephine Mason) ***** MAKING THE CASE FOR A GERMAN FISCAL EXPANSION (1045 GMT) Goldman has weighed in on the debate about fiscal stimulus and while it agrees with a widespread view that a shock would be needed to convince Germany to open the purse strings, it argues that the case for Europe's No. 1 economy to do so is compelling. Their case for a sizeable German fiscal expansion levers on three three key points. 1. Germany has significant fiscal space: "Germany could expand fiscal policy by about 1% of GDP in 2020 without seeking an exception from its 'debt brake'rule" 2. Sizeable effects on German growth: "ECB is unlikely to respond to a German fiscal expansion with tighter policy. Moreover, fiscal 'multipliers' tend to be larger in low-debt economies and during recessions." 3. Welcome spillover effects: "Germany is a very open economy and trade patterns suggest that stronger German demand would provide greatest support to EMU member states that most need it, notably Italy." Meanwhile, ECB's Draghi has once again emphasised the need for fiscal policy, saying in an interview with the Financial Times that that was more urgent than before. His comments have helped lift euro-zone bond yields to one-week highs, which in turn is underpinning shares in the battered banking sector, last up 0.8%. (Danilo Masoni) ***** EUROPE: BUY OR NOT TO BUY (0859 GMT) The prospect of central bank stimulus is already having effect. JPMorgan has upgraded euro zone equities to overweight and back in July BlackRock did the same - both citing expectations of a dovish ECB. That's surely positive for stocks in the region but macro data continues its negative run and many investors look unconvinced, as continued fund outflows indicate. "Over the past four weeks, we have seen some signs of funds buying U.S. equities at the expense of European equities," say HSBC strategists. They add European equity funds have seen over $100 bln outflows YTD with their proprietary analysis indicating global funds are rotating allocations out from Europe into the US. "Investors' negative outlook towards Europe can be attributed to slowing economic growth...," they say. "With Germany in outright recession and high economic policy uncertainty in the UK, we believe investors' outlook is unlikely to change soon." This chart shows that the gap between increasingly positive U.S. economic surprises and increasingly negative euro zone ones has widened to its highest since May 2018. (Danilo Masoni) ***** OPENING SNAPSHOT: TECH DRAGS, SPAIN SHINES (0735 GMT) European stocks open slightly lower, mainly dragged down by tech and telco stocks, as reports of Washington's plan to delist Chinese companies from U.S. exchanges raises fresh worries in U.S.-China trade row. Chip stocks are top underperformers tracking the sell-off in the U.S. Philadelphia Semiconductor exchange on Friday. Meanwhile, Spanish stocks are steadily rising this morning after the blue-chip index's IBEX underperformance this year. Among major single stock moves, Glaxosmithkline is rising 2% after encouraging trial results from its cancer therapy, niraparib. KPN is sliding 2% after the Dutch telco dropped appointment of Dominique Leroy as CEO. (Thyagaraju Adinarayan) ***** MIXED PICTURE IN EUROPE (0650 GMT) European stocks are expected to end the month and quarter on a slightly weak note amid renewed concerns about the U.S.-China trade spat after a report that Washington is considering delisting Chinese companies from U.S. stock exchanges. Stock futures are pretty mixed, with Paris futures down 0.1% and Madrid up 0.2%. A rise in German retail sales in August has helped ease some worries that a slower pace of manufacturing would hurt consumer spending in Europe's top economy. In corporate news, Kloeckner shares are down more than 4% in pre-market trade after a local newspaper report that talks over a potential steel tie-up with ThyssenKrupp collapsed. In other dealmaking, Anglo-Australian miner Rio Tinto, has cancelled plans for the sale or floatation of its Canadian iron ore business, following unsuccessful attempts to find buyers, according to a Wall Street Journal report. KPN shares are seen down 5% after Dominique Leroy, the Belgian telecommunications executive who was slated to move the Dutch company, has been dropped as candidate to take the top job due to an investigation into a share sale. Leroy is under investigation for her sale of shares in Proximus, the company she was leaving. Shell is seen under pressure after it says it sees negative impact from foreign exchange in Q3 and a net charge of $700 million to $850 million in Q3, while BP may fall after a report CEO Bob Dudley is preparing to step down from the oil major. Here are some early headlines: Novartis says Kisqali boosts survival in breast cancer patients Italy investigates wife of Eni's CEO in Congo graft probe Results of GSK and AstraZeneca trials may widen ovarian cancer drug use EQT buys German fibre optic firm Inexio; source values deal around $1.1 bln Roche extends Spark offer again as regulatory review drags on Sunrise cuts rights issue to 2.8 bln Sfr in push to buy Liberty Global's UPC Rio Tinto scraps plans for Canadian iron ore unit sale, floatation - WSJ France blames XL Airways collapse on Oslo aid, appeals to EU Italy's Atlantia picks KPMG, Ramboll and SGS to conduct audit on units involved in probe Nestle, P&G say they will miss 2020 deforestation goals Evotec And Indivumed Reach Milestone In Joint Drug Discovery Collaboration KPN drops Leroy as CEO candidate amid investigation into share sale (Josephine Mason) ***** EUROPE ENDING Q3 ON LACKLUSTRE NOTE (0528 GMT) European stocks are expected to end the month and quarter largely on a slightly lacklustre note amid fresh worries about tensions between China and the United States. IG financial spreadbetters expect London's FTSE to open 4 points lower at 7,423, Frankfurt's DAX to open 10 points lower at 12,371, and Paris' CAC to open 7 points lower at 5,633. Chinese markets, which will shut for the rest of the week for national holidays, were slightly lower overnight after a report on Friday that the U.S. may limit Chinese company listings on its stock exchanges fueled the U.S.-China trade worries ahead of the critical October negotiations. Dust appears to have settled in the United States though, with Wall Street futures indicating a higher open later. Closer to home, transatlantic trade ties face renewed disruption this week when global arbiters are expected to grant the United States a record award allowing it to hit European imports with billions of dollars of tariffs in a long-running aircraft subsidy dispute. The pan European index and euro-zone benchmark closed last week at a one-week high, but notched up their first weekly drop in six as macroeconmic data renewed concerns about the health of the euro-zone economy and the U.S. impeachment probe of President Trump rattled investors. They are on track for a more than 3% rise this month and their third straight quarterly gain, although the pace of growth has slowed substantially from the double-digit percentage gains in Q1. (Josephine Mason) ***** (Reporting by Danilo Masoni, Joice Alves, Josephine Mason, Julien Ponthus and Thyagaraju Adinarayan)