LIVE MARKETS-Hope keeps the rally going, not earnings

* STOXX 600 and FTSE 100 down 0.2%

* Trade talks mixed signals

* On focus Natixis, Allianz and Richemont Welcome to the home for real-time coverage of European equity markets brought to you by Reuters stocks reporters and anchored today by Joice Alves. Reach her on Messenger to share your thoughts on market moves: joice.alves.thomsonreuters.com@reuters.net

HOPE KEEPS THE RALLY GOING, NOT EARNINGS (1506 GMT)

This rally sure is keeping investors scratching their heads! While some worry about a melt-up, others wonder why are we hitting record highs.

Well, one thing's for sure, it's not because of great earnings, say DWS analysts who note earnings estimates for the S&P 500 have fallen by 8.6% compared to estimates of a year ago and that the fall is worst in cyclical export-oriented markets like Germany.

"The reporting season has not changed this and 2020 estimates are being further reduced. This is not the basis for a sustained stock-market rally," writes Thomas Bucher, a DWS equity strategist.

So belief in central bank intervention, trade war truces and macro bottoming up has had a lot to do with the rally.

"Hope seems to be driving markets for now", is how DWS puts it.

(Julien Ponthus)

*****

SHORT THAT TWEET! DID TRUMP JINX THE RALLY? (1202 GMT)

The timing of Donald Trump's tweet yesterday inviting his fellow Americans to enjoy another day of record highs on Wall Street was somehow unfortunate:

Because soon after, this hit the screens:

EXCLUSIVE-Rollback of China tariffs faces fierce opposition in White House-sources

Which has this effect of the S&P:

Which triggered this kind of sarcasm:

(Julien Ponthus)

*****

IS THE RALLY OVER? (1113 GMT)

We've started seeing some calls that much of the good news has already been priced in and that's pretty evident in the pull back in European shares after five good days.

BAML analysts, who remain positive on European stocks, say "growth has started to improve and macro uncertainty is fading, but much of the good news is already priced into markets."

The recent rally has been dominated by gains in cyclical stocks, which have outperformed defensives by 10% since September.

"We maintain a small overweight of cyclicals versus defensives, but are underweight a number of cyclical sectors that look particularly stretched, among them autos."

Auto stocks have risen a whopping 25% from August lows and BAML says under current macro assumptions, which is quite optimistic, it implies a 5%+ near-term downside for cyclicals versus defensives.

The bank says it sees renewed upside for cyclicals in Q1.

(Thyagaraju Adinarayan)

*****

THAT FISCAL STIMULUS? HIDING UNDER YOUR NOSE MATE!

Notice all that talk and buzz about how 2020 could be the year of the Keynesian comeback with a possible German spending plan or a U.S. Green New Deal?

Well hypothesising is fine but there's an incoming real big fiscal stimulus that was hiding under our nose just in the UK.

If you wanted proof that the UK has jumped out of austerity, at least in theory, just look at today's headlines: mine (budget) is bigger than yours, is a good way to sum up how Labour and the Conservatives are both promising big bucks for, among other things, health, education and the National Health Service.

The times they are changing: France is getting away with spending its way out of the "Gilets Jaunes" social crisis and Germany is tempted to invest its huge surplus in infrastructure if that can convince Lagarde to gradually put an end to the negative interest rates experience.

In that way perhaps, Britain 2019 may be giving us a taste of what's to come in the euro zone or indeed in the U.S. should someone like Elizabeth Warren have her way.

Here's how two British papers' see the spending competition between Jeremy Corbyn's Labour and Boris Johnson's Conservatives:

(Julien Ponthus)

*****

OPENING SNAPSHOT: BACK TO RED (0858 GMT)

All European indexes are trading in negative territory at the opening as investors are trying to make sense of the mixed signals they received overnight about U.S.-China trade talks.

The pan-European STOXX 600 index is down 0.5%, with miners, which are most exposed to the trade spat, leading losses with a 1.7% fall and European banks, which had quite a sweet week, are down 1.4%.

Even single stocks, which reported positive results are trading lower this morning. Natixis had a splendid day yesterday, hitting its highest since May, and it has also reported better than expected results in the late afternoon yesterday but shares are down 5.5% suggesting investors may be after some profit taking.

Similarly, Allianz was seen higher ahead of the opening as it reported better-than-expected results today, but investors are cashing out as the company hit a 17-year high yesterday, making it a good time to sell the stock.

Richemont shares slipped 5.5% as the company missed estimates claiming difficulties in Hong Kong.

Here is the super red snapshot of the European bourses at the opening:

(Joice Alves)

*****

ON OUR RADAR: INSURERS, ASIA AND ITALY (0757 GMT)

European futures are all trading in negative territory this morning after Asian stocks stepped back from highs reached overnight when Beijing said it agreed with the U.S. to cancel tariffs in phases. A Reuters report raising fresh worries about the outlook for a deal is now weighing on sentiment. and.

On the corporate front, it is still all about Asia. Richemont said political protests in Hong Kong weighed on sales growth in the six months to Sept. 30, but strong demand in the rest of China, Korea, Japan and the United States made up for this.

Yet, traders are seeing the luxury shares down 3% today.

It is a busy and happy Friday for insurers. Allianz reported a better-than-expected 0.6% rise in Q3 net profit. Societa Cattolica di Assicurazione said its 9M net profit is higher than last year.

More Italian companies are taking the stage with an array of earnings updates: Telecom Italia , Fincantieri , Unipol Gruppo, are some of the names reporting results.

Here are some of today's main headlines so far:

Insurer Phoenix's top boss Bannister to step down in 2020

Fincantieri 9-Mth EBITDA Up At EUR 287 Mln

Credit Agricole Q3 profit rises as its investment bank shines

Telecom Italia picking funds for fiber network deal as debt falls

Equinor sells its assets at U.S. Eagle Ford to Repsol for $325 mln

Portuguese bank Millennium bcp posts best nine-month results in 12 years

Natixis beats Q3 profit forecasts, cuts M&A budget

(Joice Alves)

*****

WHAT A NIGHT (0647 GMT)

European bourses are expected to open lower this morning, after Asian stocks retreated from six-month highs on uncertainty whether China and U.S. got a trade deal.

What a night of ups and downs. Global markets rallied during Asian hours on reports the two countries agreed to roll back tariffs on each others' goods as part of the first phase of a trade deal.

But investors soon got worried the pact could fall apart as an outside adviser to Trump said there was no specific agreement for a phased rollback of the tariffs.​

On the corporate front, Italian and Nordic companies are taking the stage with an array of earnings updates: Telecom Italia, Fincantieri , Unipol Gruppo, Societa Cattolica di Assicurazione, Mekonomen and Sinch are some of the names reporting results.

Financial spreadbetters at IG expect London's FTSE to open 26 points lower at 7,391, Frankfurt's DAX to open 55 points lower at 13,235 and Paris' CAC to open 31 points lower at 5,860.

(Joice Alves)

*****

(Reporting by Danilo Masoni, Joice Alves, Julien Ponthus and Thyagaraju Adinarayan)