LIVE MARKETS-Fund managers look for Brexit bargains

* European stocks higher: STOXX 600 up 0.5%, FTSE +0.34% * DAX shrugs off weaker-than-expected German industrial orders * AMS, Osram slide after deal fails * SIG sinks 15% after profit warning, drags building materials stocks with it Welcome to the home for real-time coverage of European equity markets brought to you by Reuters stocks reporters and anchored today by Julien Ponthus. Reach him on Messenger to share your thoughts on market moves: rm://julien.ponthus.thomsonreuters.com@reuters.net FUND MANAGERS LOOK FOR BREXIT BARGAINS (1428 GMT) The chorus of voices saying now's the time to jump on bargains in the UK stock markets is growing. There is now a little bit of evidence that there has been a warming, albeit small, towards the world's most-shunned equity market. While UK allocations by fund managers are still languishing near record lows in the midst of Brexit-induced uncertainty, the value trend has contributed to an uptick in the past month in exposure to the UK, climbing to 7.48% from 7.41% of total global investment, according to Copley Fund Research, which monitored flows in 432 funds with $800 billion under management. Here's the chart that shows Copley's research results: The debate continues on whether the rotation into value stocks and out of growth sectors will continue in earnest. River and Mercantile's Hugh Sergeant says he is more convinced than ever that now is the time to pounce given value's big discount to growth. "The opportunity set is arguably as great as I have known in my career," he says. "Markets remain nervous but relative valuations between value and growth have become more extreme since the end of the last quarter and, as a result, our conviction has increased, while recognising that we are participants in a very unusual period for investors." He runs the R&M UK Recovery and R&M Global Recovery funds. To be sure, there have been periods like this over the past decade or so and growth has won out after a brief rotation into value that lasted a few months. (Joice Alves and Josephine Mason) ***** D FOR DISCONTENT (1206 GMT) Hong Kong, Egypt, Russia, Ecuador, Britain - people are taking to the streets around the globe, raising their voices against threats from eroding civil liberties or climate change to economic inequality. Protests are hardly new. But whereas political risk in the shape of popular protests has largely been confined to frontier or emerging markets undergoing dramatic changes or reform programmes, they have become much more prevalent and now have major policy implications. France's yellow vests or "gilet jaunes" forced Paris to change economic policy, environmental group Extinction Rebellion has helped put climate change on the agenda of many western governments. The outcome of the showdown between Hong Kong's protesters and the authorities is as yet unclear. "The increase in the number and geographical reach of mass protests in recent years has been remarkable," says Philippe Dauba-Pantanacce, global geopolitical strategist at Standard Chartered Bank. Deep inequalities laid bare by the 2008 great financial crisis (GFC) and a surge in social media use are some underlying causes, says Dauba-Pantanacce, adding protest activities had reached "unprecedented levels". But there is also a general backsliding of democracy: 2018 marked the 13th straight year of deteriorating freedoms around the world, according to the U.S. think tank Freedom House. For markets, political risk has become a fact of life - and one that isn't about to change. "Protest momentum is likely to remain strong, fuelled by disillusionment and technological change," says Dauba-Pantanacce. (Karin Strohecker) ***** BARGAIN HUNTING IN LONDON (1127 GMT) European stocks are seen as quite cheap compared to other markets and UK stocks even more so, making them an ideal hunting ground for bargain hunters. UBS has done some math to spot where could the best London opportunities be, saying that recent marketing events suggest interest from investors is growing largely due to valuation. "The recent move in sterling and outperformance of domestic shares has also refocused investors on the potential for significant moves under the surface of the UK equity market," analysts at the Swiss bank led by James Arnold write. Putting aside political volatility, UBS says one way to scout for ideas is to look at the FTSE 100 shares whose valuation is low relative to their 10-year median. Under these criteria, tobacco group British American Tobacco, bank Barclays, airline IAG and builders Berkeley Group and Persimmon rank among the top five placed on the index. Another way is to look at companies with a high free-cash-flow yield and a headline debt-to-EBITDA ratio below the previous 10-year average. The top 5 FTSE, buy-rated names here are advertising group WPP, Persimmon and IAG (also ranking on top of the previous list), as well as builder Taylor Wimpey, and precious metal miner Polymetal. Since the Brexit referendum in 2016, UK stocks' multiples have been under constant pressure. Relative to the STOXX 600, the FTSE 100 now looks the cheapest in nearly two decades years on a forward P/E basis, as you see in the chart. (Danilo Masoni) ***** ARE EQUITY MARKETS PRICING IN LOTS OF GOOD NEWS? (0930 GMT) A solid bounce back on Friday and today's slight move higher shows that the equity markets are pricing in some really good news. Are we going to have a warm autumn on earnings and data front? Time will tell. Meanwhile, Deutsche Bank analysts say equity-market pricing and positioning at current levels represents "a strong view that macro as well as earnings growth will rebound". "Overall positioning in equities, encompassing both discretionary and systematic strategy exposures, is still near neutral and not high in absolute, but very high relative to levels seen in prior periods of comparable slow growth." But, investors, analysts and equity strategists we spoke to believe there is more pain for Europe Inc in 2020 as earnings drought is seen spilling over. (Thyagaraju Adinarayan) ***** OPENING SNAPSHOT: CAREFULLY OFF THE BACK FOOT (0840 GMT) European stock markets opened in the red and slightly worse than what futures or spreabetters indications had initially suggested. Traders are however gradually and carefully getting off the backfoot and most bourse and sectors are now trading positively. There isn't however much out there in terms of news on the macro side to fuel the optimism. Defensives are the biggest drivers with healthcare and food & beverage sectors rising 0.9%. In terms of individual stocks there are quite a few negative headlines. Osram Licht took a big hit, now down 4% with Austria's AMS failing in its takeover attempt . Building materials supplier SIG collapsed 23% after it warned that annual profit in its core businesses would be significantly lower, hit by a deteriorating construction market as a downturn in Britain and Germany deepened and fears of a recession loomed. That also hit peer Travis Perkins which fell 4.1%. Another spectacular move was in Safilo which is down close to 5% after rising almost 12% on Friday. There was speculation that France's Kering could be looking at the Italian company as a possible takeover target but that’s no longer the case. HSBC was nearly flat after the FT'S report that the bank plans to cut 10,000 jobs. Bayer is up 1.7 percent after news that a pending U.S. lawsuit over claims related to its glyphosate-based herbicide Roundup has been delayed. Here's your opening snapshot: (Julien Ponthus) ***** OSRAM, SIG AND SAFILO AMONG EXPECTED FALLERS (0753 GMT) No drama expected at the open for European stock markets this morning with benchmarks seen hovering at plus or minus 0.2 pct. Anxiety over the trade war talks in Washington or Brexit negotiations this week have yet not killed The “Goldilocks” buzz from the U.S. jobs data on Friday. There seems to be little reaction so far on DAX futures about German industrial orders falling more than expected. It does however add yet more evidence that Europe's largest economy is getting stuck into a slowdown. There is some action on the downside for some individual stocks, notably Osram with Austria's AMS struggling in its takeover attempt and SIG warning on full-year profit as construction activity lags. Shares in Safilo will be closely watched after they rose almost 12% on Friday. There was speculation that France's Kering could be looking at the Italian company as a possible takeover target but that’s no longer the case. It is still unclear from pre-market data whether reports that HSBC plans to cut 10,000 jobs will have much of an impact. Bayer is seen rising after a pending U.S. lawsuit over claims related to its glyphosate-based herbicide Roundup has been delayed. (Julien Ponthus) ***** NOT MUCH MOVEMENT EXPECTED AT THE OPEN (0524 GMT) Clearly the U.S. job data's soothing effect can still be felt and it all seems pretty quiet this morning in Europe after Asian shares edged higher as concerns of a slowdown in the world's largest economy eased. IG Financial spreadbetters expect London's FTSE to open 12 points down, Frankfurt's DAX 4 points higher and Paris' CAC to lose 3 points while U.S. futures are slightly in the red after their rally on Friday. Anxiety is bound to rise as we get closer to the U.S.-China trade negotiations in Washington planned on Oct 10-11. This quote from our Wall Street market report on Friday sums up pretty well market sentiment towards Friday's nonfarm payrolls: "It's sort of a Goldilocks report: it's not strong enough to move the Federal Reserve away from cutting rates at the end of October, but it's not weak enough to make you concerned about the labor market or the consumer," said Shawn Snyder, head of investment strategy at Citi Personal Wealth Management in New York. Bets that the Fed will cut interest rates have surged this week after a dramatic contraction in U.S. manufacturing, cooling private sector hiring, and a fall in service sector activity pointed to widening fallout from the U.S.-China trade war. (Julien Ponthus) ***** (Reporting by Danilo Masoni, Joice Alves, Josephine Mason, Julien Ponthus and Thyagaraju Adinarayan)