LIVE MARKETS-European stocks take a turn for the worse

* European stocks dip after positive open

* Healthcare leads sectoral fallers, tech up

* Results boost Dassault, Nokia, NEX

* Capita falls as brokers weigh in

Feb 1 (Reuters) - Welcome to the home for real time coverage of European equity markets

brought to you by Reuters stocks reporters and anchored today by Danilo Masoni. Reach him on

Messenger to share your thoughts on market moves: danilo.masoni.thomsonreuters.com@reuters.net

EUROPEAN STOCKS TAKE A TURN FOR THE WORSE (1505 GMT)

Germany's DAX is down 1.1 percent at its lowest since Jan 3, leading European stocks down as

this morning's short-lived recovery fades from memory, with earnings disappointments outweighing

the gains in tech and banking stocks. Only the banks-heavy Italian index is holding on to its

gains as the session draws near its close.

A downbeat U.S. open isn't helping sentiment, with investors across the pond focusing on the

Fed raising its inflation outlook and earnings undershooting expectations.

Healthcare stocks are the worst performing with Novo Nordisk down 6.5 percent

after results, the biggest weight on the STOXX.

Investors are noting a wide divergence in share price reactions to results, with

disappointments taken particularly badly.

"Where companies are giving guidance that's any less optimistic than it has been, they are

seeing their share prices quite savagely hit," said Stephen Macklow-Smith, European equities

fund manager at JP Morgan Asset MAnagement.

A surprise afternoon drop also from UK workspace company IWG, down 16 percent as

investors desert the stock after Canada's Brookfield Asset Management and Onex Corp

said they decided against making an offer for it.

(Helen Reid)

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"GO LOCAL" IN EURO ZONE STOCKS AS EURO SURGES HIGHER (1402 GMT)

That's what UBS recommends as it ups its forecasts for both Eurozone GDP growth and the euro

- a mixed blessing for euro zone stocks.

The bank's strategists have raised global and Euro zone GDP forecasts substantially, and

also see the euro rising more than previously expected, to $1.30 at year-end.

The stronger growth forecasts add around 2 percentage points to their top-down earnings

forecast for European equities - but the bigger FX headwind will likely erase that gain, so

equity strategists are sticking with their 10 percent EPS growth forecast for the year and

target of 440 for the STOXX 600 by year-end.

They recommend stocks with over 45 percent of domestic revenues, yet which also provide

cylicality and strong earnings growth - such as banks, insurance and software stocks.

Euro zone exposed stocks are also attractive in terms of valuation, trading on a P/E of 13.8

compatred to 16.2 for U.S. exposed stocks in the region and 20.5 for EM exposed stocks, UBS

finds. And they've still got far to go: while they've outperformed by 5 percent since the

beginning of 2017, they're still down 24 percent from the post-crisis peak.

(Helen Reid)

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"EXPECT MORE DIVIDEND CUTS IN THE UK" (1324 GMT)

That's a quote from SocGen strategists. In a nutshell, beware UK companies which offer

attractive yields but don't necessarily have the balance sheet to back them up when profit

warnings hit the screens.

The French bank has a "dividend risk screen" and says "several UK names that have recently

got into trouble were on this list".

"Of the current 50 names, 21 are UK-listed, close to historical highs", SocGen analysts add.

Capita, by the way, was on that list prior to its profit warning:

(Julien Ponthus)

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A TOUGH START FOR EUROPE'S NON-FOOD RETAILERS (1316 GMT)

It's evident from the results we've had so far from the European non-food retailers that

certain themes are gaining favour with investors, such as progress in online and a more

value-oriented offering.

Analysts at Deutsche Bank point to "another month of polarisation", and they highlight five

key investment themes in the space:

1) Buy the value retailers;

2) Watch value traps in mid-market apparel retail;

3) Online brands over platforms;

4) Remain cautious about 'transformation stories';

5) Buy travel at right price.

Here's how the non-food retailers of the STOXX 600 have performed so far this year - it's

been a tricky start for some:

(Kit Rees)

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"DEATH, TAXES AND BEAR MARKETS" (1232 GMT)

"There are three certainties in life: death, taxes and bear markets", says Peter Elston, CIO

of Seneca Investment Managers.

Timing, of course, makes all the difference and Elston, whose firm has already lowered

equity weights, sees a bear market coming in late 2019.

According to Seneca's research, a gradual tightening of monetary policy will cause a

downturn in the global economy in 2020. Even if things don't exactly unfold at that pace, Elston

argues there is a case to act now.

"We will almost certainly be wrong with our timing but this is why we are acting now. If we

are late, we will have already reduced equity exposure. If we are early, and the bull market

continues into 2020, we can continue to reduce our equity targets even more."

(Julien Ponthus)

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WHAT WOULD A MEGA ITALIAN BANK MERGER LOOK LIKE? (1150 GMT)

"Consolidation is the only survival strategy," says Equita analyst Giovanni Razzoli in a

study this week where he simulates the unthinkable: a mega Italian bank tie-up sponsored by the

government and combining state-controlled Monte dei Paschi di Siena, Banco BPM

, BPER Banca, Credito Valtellinese and Banca Carige to

create the country's largest franchise.

Razzoli calls the five-bank combination "project Overlord" and assumes that Italy's Ministry

of Economy and Finances which controls Monte Paschi would sponsor it.

He's aware of the risks but sees rich rewards too.

"We are perfectly aware that a 'project Overlord' would feature very high execution risk,

and – above all - several governance issues. The project is likely to 'scandalize' most of the

shareholders of the banks potentially involved," he writes.

He envisages a two-step process.

The banks involved would first put together the main administrative and governance functions

in exchange for shares in a new holding company at market prices. Secondly they would move to a

deeper integration and look at the cost-cutting options.

The new bank would be the leader in Italy with a capitalisation of 12 billion euros before

synergies and a 20 percent market share of the Italian banking system, leapfrogging Intesa

Sanpaolo and UniCredit.

(Danilo Masoni)

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TACTICAL INDICATORS FLASHING RED? DON'T PANIC (1110 GMT)

Credit Suisse's aggregate tactical indicator hit its highest level of exuberance in the last

12 years late last week, the bank's global equity strategists say, but they don't interpret this

as a sell signal.

"Both the aggregate tactical and sentiment signals have been much better buy than sell

signals: euphoria lasts longer than panic!" writes strategist Andrew Garthwaite.

According to Garthwaite, only two of the normal 13 preconditions of a market peak have been

seen - so remaining positive on stocks despite their strong rally isn't irrational.

"We still find subdued wage growth, extremely strong earnings revisions, a high equity risk

premium, excess liquidity and funds flow are all supportive for equities," he says.

Interestingly cyclicals (apart from tech and financials) are however a risk area Garthwaite

is nervous about, saying these stocks have priced themselves off extreme PMIs/ISMs.

(Helen Reid)

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THE UK IS THE LAGGARD IN 2018 (SO FAR) (1050 GMT)

Just a quick observation as we step into a new month - the UK equity market has notably

lagged the rest of the world in terms of total returns so far this year - see the chart below.

Conversely, emerging markets and Europe (ex-UK) are shaping up to be this year's winners. It

is early days yet, but investors could be betting on these two regions as big beneficiaries of

the synchronised upswing in global growth, whereas investors are still nervous around the UK?

(Kit Rees)

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VIEW FROM THE STREET: THE CASE FOR NOT BUYING THE DIP IN CAPITA (1043 GMT)

After a 48 percent fall yesterday, brokers are digesting UK outsourcer Capita's

latest profit warning and outlining the possibilities for its future. Down another 4 percent

today to 177p the stock is certainly cheap - but why are bargain-hunters not snapping it up?

"Too early to buy back in despite the fall," say Deutsche Bank analysts. "Although the

company may generate further cost savings we don't give them the benefit of the doubt that these

will positively impact profitability in 2019."

They don't see Capita showing growing profitability until 2020 at the earliest - a date UBS

also targets as a potential recovery point.

"We think a (required) focus on internal execution will see negative earnings growth and

free cash flow for FY18e and FY19e, but FY20e could see both turn positive," write UBS analysts.

Barclays says Capita is a five-year turnaround story which must also grapple with "profound

change and uncertainty" in its markets.

"This is a first and necessary step on the road to recovery, but the lack of visibility

coupled with experience at Serco (where three years on the recovery in revenue and profits is

still elusive) will likely keep new money on the sidelines for a while yet," Barclays analysts

write.

(Helen Reid)

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BINGE-BUYING EUROPACORP SHARES, NETFLIX AND NO CHILL (1003 GMT)

Shares in French film director Luc Besson's EuropaCorp are on fire this morning, up

as much as 40 percent after French business daily Les Echos reported Netflix is in talks - not

clear at this stage exactly about what - with the company which made a hit with "Lucy", staring

Scarlett Johansson, in 2014.

After a box office disappointment for its big budget sci-fi movie "Valerian and the City of

a Thousand Planets" this summer, EuropaCorp has been on the look-out for new partners to bring

in fresh cash or help it restructure its debt.

EuropaCorp is worth currently a bit less than 100 million euros on the Paris stock market,

that's a market cap about 1000 times smaller than Netflix, which plans to spend up to $8 billion

this year on TV shows and movies to fend off rivals such as Amazon Prime.

Here's Luc Besson and the logo of his company in the background.

(Julien Ponthus)

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OPENING SNAPSHOT: TOP MOVERS (0817 GMT)

Return of the melt-up? European stocks are striding into February with strong gains led by

banking and tech stocks.

Among notable movers after results, Bic is down 6.7 percent while NEX Group

is top of the STOXX, up 7.4 percent after revenues rose. The financial technology firm

benefited from markets it said were 'noticeably' more active this year.

Meanwhile Shell took a 5 percent dive at the open and is now down 1.8 percent, the

worst-performing on the FTSE 100. It seems the cashflow might be what the market's taking issue

with. "Unfortunately, resilient earnings do not appear to have translated into cash generation

this quarter," write RBC analysts.

Dealmaking is still a feature too with Denmark's TDC tumbling 10.7 percent after

saying it would buy Swedish Modern Times Group's broadcasting and entertainment

business.

(Helen Reid)

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WHAT YOU NEED TO KNOW BEFORE EUROPE OPENS (0748 GMT)

European shares are expected to open higher on the first day of February with futures up

around 0.4-0.5 percent following a weak end of January, which was marked by jitters over rising

bond yields and a stronger euro.

Earnings will be a key focus with heavyweights such as oil major Royal Dutch Shell

and drugmaker Roche having already reported results. Profits at Shell more than doubled,

slightly beating analyst expectations, although traders indicated the stock 1-2 percent lower

citing weak cash flow. Net income at Roche fell as sales growth was broadly in line with

expectations.

Consumer goods maker Unilever delivered better than expected fourth-quarter sales

growth, a possible relief for a sector which has been hit this year by a rotation back into

cyclical stocks. Its shares were indicated 1 percent higher.

Overall fourth-quarter earnings for the STOXX 600 are expected to increase by 11.9

percent year on year, the latest Thomson Reuters data showed.

In M&A news, traders mentioned as possibly market-moving a Bloomberg report saying BHP

is mulling a split of its US shale unit to speed up the sale of the business it values

at $10 billion.

(Danilo Masoni)

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EUROPEAN STOCKS HEADLINE ROUND-UP (0733 GMT)

With so many results coming in today, we've rounded up some of the most important we're

watching:

Shell's 2017 profits more than double

Unilever fourth-quarter sales better than expected

Daimler warns spending on new technology to dampen earnings growth

Vodafone's growth edges lower in Europe, but still on track for year

Nokia top quarterly expectations, buoyed by patent payment

Roche expects 2018 profit to grow faster than sales[

BT's Openreach ramps up fibre broadband rollout

Microsoft's cloud computing business grows, stock edges up

Facebook forecasts rising ad sales despite dip in usage

Novo Nordisk posts Q4 results slightly below expectations, chairman to step down

BBVA Q4 net profit falls 90 pct after Telefonica stake writedown

Denmark's TDC to buy MTG's Nordic Entertainment and Studios

Denmark's Orsted beats Q4 forecasts on strong wind operations

DNB Q4 beats forecast despite rise in digital investment

Dassault Systemes posts double-digit growth in new licences revenue

Lundin Petroleum launches dividend payments

Skanska construction order intake just lags expectations

UK's Rank interim profit jumps on strong online business

Vivendi CEO optimistic about talks with Mediaset over pay-TV dispute

Oreo maker Mondelez's profit beats on higher demand for key brands

Melrose to publish formal bid document for GKN on Thursday - source

Britain's Cranswick says Q3 revenue ahead on strong Christmas

NEX Group says markets "noticeably" more active since start of 2018

British private equity group 3i posts increase in net asset value per share

Ocado promotes Luke Jensen to executive director role​

(Tom Pfeiffer)

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FUTURES POINT TO BOUNCEBACK FOR EUROPEAN STOCKS (0717 GMT)

Futures have opened markedly higher this morning, pointing to a convincing bounceback for

the European stock market after a weak end to January. As we pointed out earlier, it's all about

earnings today, and UK companies' results have just hit the wire with heavyweights Unilever

and Shell reporting as well as Vodafone.

(Helen Reid)

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EARNINGS, EARNINGS, EARNINGS (0642 GMT)

It's going to be another busy day for corporate eanings with some big heavyweights like

drugmaker Roche, bank BBVA and Nokia

having already released their numbers earlier on.

Overall fourth-quarter earnings for the STOXX 600 are expected to increase by 11.9 percent

year on year, the latest Thomson Reuters data showed.

Here's your full list of companies reporting today:

AB SKF Q4 2017 Earnings Release

AcadeMedia AB Q2 2018 Earnings Call

Aptiv PLC Q4 2017 Earnings Call

Banco Bilbao Vizcaya Argentaria SA Q4 2017 Earnings Call

CapMan Oyj Q4 2017 Earnings Release

Cimpress NV Q2 2018 Earnings Call

Coloplast A/S Q1 2018 Earnings Call

Core Laboratories NV Q4 2017 Earnings Call

Daimler AG Q4 2017 Earnings Release

Dassault Systemes SE FY 2017 Earnings Call

DNB ASA Q4 2017 Earnings Release

Eaton Corporation PLC Q4 2017 Earnings Call

Ferrari NV Q4 2017 Earnings Call

Granges AB Q4 2017 Earnings Release

Inwido AB (publ) Q4 2017 Earnings Release

JM AB Q4 2017 Earnings Release

Kesko Oyj Q4 2017 Earnings Release

Lemminkainen Oyj FY 2017 Earnings Call

Lundin Petroleum AB Q4 2017 Earnings Release

Modern Times Group MTG AB Q4 2017 Earnings Release

Nokia Oyj Q4 2017 Earnings Release

Novo Nordisk A/S Q4 2017 Earnings Call

OM Asset Management PLC Q4 & FY 2017 Earnings Call

Orsted A/S Q4 2017 Earnings Release

Panostaja Oyj Annual Shareholders Meeting

Petroleum Geo Services ASA Q4 2017 Earnings Release

Qiagen NV Q4 2017 Earnings Call

Rank Group PLC HY 2018 Earnings Release

Roche Holding AG FY 2017 Earnings Release

Royal Dutch Shell PLC Q4 2017 Earnings Release

Sensata Technologies Holding NV Q4 2017 Earnings Release

Skanska AB Q4 2017 Earnings Release

Stolt-Nielsen Ltd Q4 & FY 2017 Earnings Call

Unilever PLC Q4 2017 Earnings Release

Yit Oyj Q4 2017 Earnings Release

(Danilo Masoni)

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MORNING CALL: EUROPE SEEN HIGHER (0617 GMT)

Good morning and welcome to Live Markets.

European stocks are set for a positive open on the first day of February, recovering the

slight losses seen in the previous session when the broader STOXX 600 index fell for a

third straight session to its lowest level in almost four weeks. The STOXX ended January up 1.6

percent.

Overnight Asian shares eked out modest gains, clawing back sharp losses from earlier this

week, however, rising U.S. bond yields and interest rates could dampen investors' optimism

toward the global economic outlook.

Here are your opening calls, courtesy of CMC Markets.

FTSE100 is expected to open 23 points higher at 7,556

DAX is expected to open 41 points higher at 13,230

CAC40 is expected to open 14 points higher at 5,495

(Danilo Masoni)

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(Reporting by Danilo Masoni, Helen Reid, Kit Rees and Julien Ponthus)