LIVE MARKETS-After ignoring Trump, Europe pounces on China stimulus

* European stocks recover early losses, now up 0.2% * China's pledge to boost car sales triggers gains in auto stocks * Autos lead gains, now up 1.5% * Investors wary about U.S. President's latest comments on trade * Italy rallies on hopes of new government; Milan up 0.9% * Spin-off news boost TechnipFMC and IWG * 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: josephine.mason.thomsonreuters.com@reuters.net AFTER IGNORING TRUMP, EUROPE POUNCES ON CHINA STIMULUS (1051 GMT) China's pledge to boost car sales has injected some fresh optimism into stocks in what's turning into another rollercoaster day on the markets. The pan European STOXX 600 is now up 0.3%, a stark reversal from a similar sized drop earlier. The speed and the size of the rebound highlight how investors pounced on news that China's State Council is considering relaxing and removing restrictions on auto purchases as much-needed good news and the latest sign Beijing wants to boost consumption to shore up the world's No. 2 economy and offset the damaging effects of the protracted trade spat. In a sign of fatigue at U.S. President Trump's comments on trade, they had largely ignored his more tempered statement on trade overnight. The autos index is now up 1.4%, easily the best sectoral performer in Europe, a move that shows investors were buying the news and ignoring the rumour. Car stocks were hardly moving this morning despite Trump's comments that he believes U.S.-EU were likely to reach a fair trade deal, averting tariffs on Germany's battered car sector. "Chinese fiscal stimulus measures are widely expected and necessary to counter the negative affects of the trade war. I imagine these will be a part of a much larger stimulus package," says Craig Erlam, senior market analyst for UK and EMEA at Oanda. (Thyagaraju Adinarayan and Josephine Mason) ***** MUCH ADO ABOUT NOTHING (0956 GMT) Global stocks have had one of the best first-half performances in decades, but if we stretch the chart a bit and look at the longer term picture it's hardly done anything. Why? In large part, the protracted trade war. Equities have lost 3% of their value since Trump's tariffs on steel and aluminium in March 2018 and since then it's been headline ping pong, except for the December 2018 crash. (see chart below) Given rising risks from the ongoing trade war, UBS has turned "underweight" on equities as it believes central banks may be able to limit the downside, but capacity to push equities higher is fading. The Swiss wealth manager and bank however says it is not expecting a traditional recession or the next Great Financial Crisis. UBS says the downside risk to equities is closer to 15% than 25% as central banks are in easing mode and fiscal stimulus is also on the horizon. Despite Trump's softening stance on trade at the G7 summit, investors seem to be skeptical about a near-term resolution to the U.S.-China trade war or additional threats globally. European stocks are down 0.3% today even after Trump said he reckons U.S. would be able to reach a fair trade deal with the European Union, potentially averting tariffs on the region's car sector. While UBS treads cautiously in an uncertain environment, JPMorgan equity strategists believe that the market will advance into the year-end, starting with a September upmove. (Thyagaraju Adinarayan) ***** RULED BY FOMO AND TINA, TIME FOR A NEW ACRONYM? (0905 GMT) Two acronyms have characterised this year's stock market rally which has been fuelled without much (any) enthusiasm among investors: There Is No Alternative (TINA) (to stocks) and Fear of Missing Out (FOMA). With bond yields deep in negative territory after the U.S. and European central banks' dovish U-turn earlier in the year, investors have been scouring the markets for bigger returns and coming up with very few alternatives other than stocks. In a market driven by acronyms, where can investors find returns in equities? Barclays strategists reckon European utilities are a safe bet given their defensive qualities. They upgraded this stance on the 'overweight' from 'marketweight' earlier this month, a rating that's unusually positive for the sector, they say. This morning, the bank upgraded its stance on E.ON and EVN. The European utilities index has outperformed the market year to date, rising by 13% compared with the 10% gains in main index and Barclays expects more to come. The strategists are advocating investors increase their exposure to more "defensive and beaten-up names". "We see a major buying opportunity in E.ON based on what we perceive as significant undervaluation and overdone negativity," they say. The chart below shows the forward price/earnings ratio for the sector and the broader European index and their performance year to date. Other sectors considered reliable in times of economic and political strife - food & beverage and personal & household goods - have also benefited from the defensive buying that's lifted stocks this year. So, is it time for a new acronym? We welcome any suggestions (anonymous or on the record) to josephine.mason@thomsonreuters.com (Josephine Mason) ***** THAT SINKING FEELING (0721 GMT) That brightening mood signalled by the gains in stock futures? It's well and truly disappeared for now. The major European bourses have opened in the red and it's all looking pretty subdued as investors shrug off U.S. President Trump's latest about-turn on his trade war with China and upbeat comments about tariffs on European cars. The euro-zone blue chip index is down 0.3%. Milan's the exception, gaining 0.1% amid renewed optimism that a snap election may be averted. But Wall Street futures are also under pressure, indicating U.S. stocks are set to reverse their relief-induced gains overnight. Reflecting the defensive nature of the market this morning, the only sectors in positive territory are rate-sensitive real estate and bond proxy utilities. Among individual big moves, TechnipFMC's Paris-listed shares are up 2.3%, after announcing plans to split in two. Its U.S. shares rallied as much as 6% overnight while office company IWG is garnering strength from a report it's mulling spinning off its U.S. business for a listing there in a bid to take on U.S. rival WeWork. (Josephine Mason) ***** EUROPEAN MOOD BRIGHTENS (0656 GMT) After a slightly shaky start, euro-zone stock futures have swung into positive territory as investors seek out a bit of risk following strong gains overnight in Asia and Wall Street after comments from U.S. President Trump calmed nervous markets about the state of U.S.-China trade talks. The initial absence of enthusiasm suggests though investors are suffering from whiplash from the ever-changing stance towards the United States top trading partners and are wary about his latest more tempered comments on both China and tariffs on European carmakers. Still the Eurostoxx are up 0.1%, with futures in the DAX, whose tech and car constituents rely heavily on revenue from China, are up 0.1%. London is down 0.5% as they play a bit of catch-up after the long bank holiday weekend. There's very little company news to digest. TechnipFMC Plc is expected to get a lift from its plans to spin off its engineering and construction operations into a separate company, leaving it as a technology-focused equipment supplier to oil and gas companies. The U.S. shares rose more than 6% overnight and dealers are calling the Paris-listed ones up 3-4%. Other headlines: Bunzl Reports HY Dividend Growth Of 2% To 15.5 Pence SAS Q3 pretax profit just above forecasts Flughafen Zuerich H1 Profit Up At 143.4 Million Francs (Josephine Mason) ***** ON OUR RADAR: OIL AND TRADE (0559 GMT) It's pretty quiet on the corporate front this morning with plenty of geopolitical news to digest, which has boosted investor appetite for risk in Asia and Wall Street overnight and are likely to determine the mood across Europe today. In the latest twist in the trade spat, U.S. President Donald Trump tempered his tone against China and struck an upbeat tone on talks with Brussels on trade issues in comments last night in Biarritz as the G7 meeting wound up. After positive gestures by Beijing, Trump predicted the two countries would be able to reach a trade deal and said he thinks Washington will be able to reach a fair trade agreement with the European Union without imposing threatened tariffs on car imports, offering a potential lifeline to German carmakers. In Italy, the ruling 5-Star Movement and the opposition Democratic Party (PD) appear on the verge of a deal to form a new Italian government after the PD indicated it had abandoned a veto on Giuseppe Conte serving another term as prime minister. Milan outperformed the broader region yesterday on hopes of a fresh coalition government that would avert a snap general election. The major corporate news in Europe is from TechnipFMC Plc which has announced plans to spin off its engineering and construction operations into a separate company, leaving it as a technology-focused equipment supplier to oil and gas companies. The U.S. shares rose more than 6% overnight and Paris-listed ones will likely follow suit. Final Q2 German GDP in a few minutes - seen -0.1% q/q seasonally adjusted, +0.4% y/y. Early headlines: Oil services firm TechnipFMC to split into two publicly traded companies Ferdinand Piech, architect of VW's global expansion, dies aged 82 -Bild Macron defuses French digital tax row, Trump coy on wine threat Daily Mail owner to sell energy data unit to Verisk Analytics for $364 mln British office space provider IWG plans $3.68 billion U.S. float- report (Josephine Mason) ***** EUROPE SEEN TREADING WATER (0524 GMT) European shares are expected to tread water again today as investors remain wary about the fast-changing headlines and news on the protracted tit-for-tat spat between Washington and Beijing. There's some decent data from China which will help to soothe worries about damage to the world's No. 2 economy from the trade war - industrial corporate profits in the world's No. 2 economy returned to growth in July, although the outlook for business conditions remains dim. Financial spreadbetters expect London's FTSE, reopening after yesterday's bank holiday, to open 10 points lower at 7,085, Frankfurt's DAX to open 39 points higher at 11,697, and Paris' CAC to open 16 points higher at 5,367. (Josephine Mason) ***** (Reporting by Danilo Masoni, Josephine Mason and Thyagaraju Adinarayan)