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LIVE MARKETS-Housebuilders hit by drop in UK mortgages

* European shares turn negative

* Fed chair Powell says more rates hikes likely appropriate

* No breakthrough in U.S.-China trade talks

LONDON, Aug 24 (Reuters) - 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:

julien.ponthus.thomsonreuters.com@reuters.net

HOUSEBUILDERS HIT BY DROP IN UK MORTGAGES (1423 GMT)

Housebuilders are among the worst-performing on the FTSE 100 today after figures from UK

Finance showed British banks approved fewer mortgages in July, despite a boost from existing

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home-owners seeking to lock in cheaper interest rates ahead of the Bank of England's rate rise

in August.

Berkeley Group, Persimmon (Frankfurt: 882058 - news) , Taylor Wimpey (LSE: TW.L - news) , and Barratt Developments (Frankfurt: 859551 - news) are all down 0.7 to 1.6

percent.

Investors are pretty downbeat on housebuilders and real estate in the UK generally, with

real estate investment trusts (REITs) trading at sharp discounts to their book value due to

Brexit fears, inflation and rising rates causing house - and office - prices to roll over.

With (Other OTC: WWTH - news) prices falling (see below), prospective homebuyers are more likely to delay their

purchase - as today's mortgage figures seem to reflect.

Jefferies analysts didn't mince their words in a recent note, saying "Buying REIT shares is

like breaking into a bank that's already been robbed" and adding "We expect domestic demand to

remain subdued until the full implications of the UK EU Referendum are known."

But Henry Dixon, manager of the Undervalued Assets fund at Man Group (LSE: EMG.L - news) , owns Bellway (Frankfurt: 869646 - news) and

Barratt Development and sees the housebuilders as attractively valued, better-financed

alternatives to REITs in order to express a positive view on UK real estate.

While REITs like Capital & Counties - which runs London's Covent Garden shopping and leisure

district - are selling premium real estate, he reckons housebuilders are more likely to be in

the affordable market, which has been less hard hit.

(Helen Reid)

*****

HELLO OLD FRIEND! (THE BIG EU BANK MERGER RUMOUR IS BACK) (1245 GMT)

Hello old friend, it's been a while!

The rumour that a pan-European banking behemoth is in the making is back again this morning.

This time it's the UniCredit (EUREX: DE000A163206.EX - news) /SocGen (Paris: FR0000130809 - news) tie-up speculation that has been revived after Milano

Finanza reported that the Italian bank was working with a senior Rothschild banker to advise it

on a possible merger. (Reuters has no-comments from all parties on the report)

The senior Rothschild banker named in the report is no less than Daniel Bouton, former

chairman of...Societe Generale (Swiss: 519928.SW - news) .

One thing to remember is that the Unicredit/SocGen merger rumours got started when Jean

Pierre Mustier, another former top executive who spent over 20 years at Societe Generale, was

appointed Unicredit CEO in 2016.

Mustier, a high-flying banker once seen as a future head of SocGen, and Bouton, a once very

powerful figure of French capitalism, both resigned in 2009 in the aftermath of the Kerviel

rogue trading scandal.

Anyhow, it's now been a few years that schemes to create European banking champions (or

too-big-to-fail monsters?) trigger some market action.

Rumours regularly tie up BNP Paribas (LSE: 0HB5.L - news) or SocGen to either Deutsche Bank (IOB: 0H7D.IL - news) or Commerzbank (Xetra: CBK100 - news) .

There's a long list of arguments used to dismiss the possibility of such big deals and one

of the most convincing is that the extra capital required to sustain a new hugely systemic bank

would absorb all synergies and make a deal pointless from a shareholder's point of view.

While a number of French or German politicians openly dream of EU banking champions able to

compete with Wall Street, the tense relationship of Berlin and Paris with Italy's

anti-establishment government also makes a deal less likely now.

Anyhow the rumour isn't harming SocGen or UniCredit shares which are up 1.3 percent and 1.1

percent respectively, comfortably above the Euro zone banking index (0.5 pct).

A Jefferies note was likely to have helped lift UniCredit with the broker's analysts taking

the view that "the bottom-up investment case for UniCredit (Buy) remains intact" despite

"near-term hurdles".

(Julien Ponthus)

*****

MIDDAY SNAPSHOT: A STEADY CLIMB FOR EUROPEAN STOCKS (1148 GMT)

Ah, the calm march higher into the weekend. A rise across cyclical sectors is keeping the

STOXX 600 in positive territory midway through the session.

U.S. stocks futures are also trading higher, with a speech from U.S. Fed Chair Powell due at

1400 GMT.

Here's your snapshot:

(Kit Rees)

*****

TRADE WAR NO DEATH SENTENCE FOR EQUITIES (0924 GMT)

Markets have been caught lately in a tug-of-war between, on the one hand, strong company

earnings, and on the other building trade war risks. Today it looks like strong fundamentals are

winning, despite inconclusive U.S.-China trade talks.

UBS (LSE: 0QNR.L - news) chief investment officer Mark Haefele strikes an optimistic tone on the trade war,

looking to historical precedent.

"'Great power (Shenzhen: 300438.SZ - news) competition' does not necessarily have to hurt markets," he says, noting

strong U.S. equity market returns in the 50s and 80s despite the Cold War and the U.S.-Japan

trade conflict.

However, he did reduce the size of his overweight position in global equities, bringing

overall asset allocation stance to "broadly neutral" as he saw the market as not pricing in the

increased tariff risk.

So why still stay keen on equities overall?

"Earnings growth is a powerful force," argues Haefele. UBS expects 6 percent earnings growth

for U.S. stocks and 14 percent for Chinese stocks in 2019 even despite the tariffs impact.

Analysts are also still becoming more positive on Europe's earnings growth outlook:

(Helen Reid)

*****

OPENING SNAPSHOT: END-WEEK BOUNCE FOR EUROPE, RYANAIR WILTS (0720 GMT)

European benchmarks are rising across the board in early trading with bank stocks and miners

the biggest boosts. Basic resources (Frankfurt: W8Z.F - news) strength came as London copper prices recovered and was set

for its best week in four.

Antofagasta (Other OTC: ANFGF - news) is among top gainers, up 2.2 percent.

Irish construction supplies firm Kingspan is leading the STOXX 600 with a 7.5 percent gain

after strong results, while Swedish Match (LSE: 0GO4.L - news) is suffering from Jefferies starting coverage with an

"underperform" rating.

Ryanair shares are down 1.7 percent, among the biggest declines on the STOXX, giving back

yesterday's gains after a deal reached with an Irish pilots' union. The airline announced

yesterday it would now charge passengers to take a 10-kg piece of hand luggage on board.

And finally, shares in Swiss semiconductor maker U-Blox (Other OTC: BLXX - news) are sinking 15 percent after the

company's disappointing results. The company reported weaker than expected results and cut its

guidance for the year, with traders flagging its China business as particularly disappointing.

(Helen Reid)

******

MORNING HEADLINES ROUND-UP (0631 GMT)

There's not loads on the corporate results front - Computacenter (LSE: CCC.L - news) , Henry Boot (LSE: BHY.L - news) , Kingspan are

among those reporting - but a drug approval for Shire (Xetra: S7E.DE - news) , car recalls from Fiat Chrysler and

Volkswagen (IOB: 0P6N.IL - news) , and NAFTA talks on autos dragging on could all move stocks today.

FDA approves Shire drug for rare swelling disorder

Fiat Chrysler, Volkswagen issue recalls for cars in Mexico

UPDATE 5-U.S.-Mexico NAFTA talks seen running into next week, autos unresolved

Computacenter half-year profit up 24 pct on higher German demand

Britain's Electra Private Equity ends buyout talks

UK's Petrofac (Amsterdam: PF6.AS - news) to sell interest in Greater Stella Area for up to $292 mln

Henry Boot Confident Of Meeting 2018, 2019 Expectations

Kingspan H1 trading profit up 10 pct, sees strong H2

Equinor awards Alcatel Submarine a monitoring contract at Johan Castberg field

State spending, investments drive German Q2 growth

(Helen Reid)

*****

FUTURES: LONDON DOWN, CONTINENT UP (0615 GMT)

Futures are now trading and indicate that the FTSE is set to retreat slightly at the open

while bourses on the continent are on course for a modest rise. With moves on both sides between

-0.2 and +0.2 percent, modest may just be the right adjective to use this morning.

(Julien Ponthus)

*****

KEEP CALM AND CARRY ON: FTSE SET FOR CALMEST WEEK in 2018 (0558 GMT)

Of course this is August and one shouldn't draw too many conclusions but this week seems on

course to be the least volatile of the year for the FTSE.

As you can see below, the British blue chip index is on a weekly gain of only 0.06 percent

(against 0.6 for the pan-European STOXX), which is clearly close to nothing and the most

insignificant move of the year.

As always, political risk, be it in the form of Brexit but also from beyond, like the

Turkish currency crisis or the China/U.S. trade war, doesn't seem to be keeping British

investors awake at night.

"Keep calm and carry on", seems to be the way forward.

(Julien Ponthus)

*****

MORNING CALL: NO CLEAR TREND YET (0530 GMT)

After U.S.-China trade talks ended without progress, it seems markets aren't ready to commit

before Powell gets a chance to give hints on the Fed's next move at the Jackson Hole meeting

later today.

After the S&P 500 and the Dow Jones slid last night and as Asian shares end the session in

negative territory, financial spreadbetters expect London's FTSE to open 9 points lower,

Frankfurt's DAX 17 points higher and Paris' CAC to rise n 7 points.

(Julien Ponthus)

*****