LIVE MARKETS-An inverse, a short and a triple leveraged ETF walk into a bar...

* European stocks slip from one-month high

* SocGen (Paris: FR0000130809 - news) drags banks down after saying Q4 warning

* Auto shares fall after senator says Trump "inclined" to impose new auto tariffs

* UK PM seeks to end Brexit stalemate after confidence vote win

* US investigating Huawei for alleged trade secret theft, says WSJ

Jan 17 - 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

AN INVERSE, A SHORT AND A TRIPLE LEVERAGED ETF WALK INTO A BAR... (1432 GMT)

Short and leveraged exchange-traded products (ETPs) grabbed the limelight last February when

the implosion of now infamous "inverse VIX" ETFs (Shenzhen: 395013.SZ - news) exacerbated market stress and caused a record

spike in volatility during a sudden selloff.

Much like during that volatility spike, some investors in short and leveraged ETFs (which

offer short, 2x short, 3x short exposure to an index, or 2x long, 3x long) have more recently

been exposed again as not making the best calls on markets.

"Short & leveraged investors started December with record levels of bullishness on equities,

which left them highly exposed to the worst December equity market since 1931," write WisdomTree

analysts in a report detailing December's flows into short & leveraged products.

Despite this, leveraged ETP investors "doubled down and bought the dip" thereafter, pushing

$2.3 billion back into these products, while short investors rubbed their hands with glee and

took profits, taking nearly $500 million out of short equity ETPs, WisdomTree continues.

In debt, total assets under management in short & leveraged ETPs amounts to $6.6 billion -

and 96 percent of that is held in short ETPs - WisdomTree notes "investors remain overwhelmingly

bearishly positioned in debt".

Interestingly investors have unwound some of their short U.S. fixed-income positions: some

$300 million was redeemed from short U.S. government bond ETPs in Dec (Shanghai: 600875.SS - news) - 12 percent of overall

assets under management - taking the AUM to its lowest since Jan 2009.

"This reflects investors' increasingly bearish views on the inflation rate and the Fed's

pace of interest rate rises going forward," WisdomTree writes.

Below you can see how assets under management in these products globally ballooned these

last few years, though they did come down last year from 2017 levels.

(Helen Reid)

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RECESSION, THE ELEPHANT OUTSIDE THE ROOM (1323 GMT)

The incoming - or not - U.S. recession has been compared to the proverbial 'elephant in the

room' for world markets but the analogy doesn't work at all.

Firstly, few analysts actually believe the beast has entered or will enter the room in the

foreseeable future.

Secondly a quick "recession" word search in our inbox reveals that every strategist and

their dog is talking about it - so much for the "R" word being taboo at the moment.

Actually, thinking about it, it's probably more the constant chatter and speculation which

could lure the elephant, currently minding its very own business, onto the trading floor.

"Animal spirits are important - a self-fulfilling prophecy is not impossible," Citi

analysts wrote this morning, referring to Keynes.

The Citi team believes that "recession concerns further weigh on confidence, accentuating

external and financial risks", a point which seems validated by HSBC's survey of UK consumers.

The data shows, HSBC analysts believe, that British shoppers are "behaving like the economy

is in a recession", and this has been impacting spending patterns and sentiment.

Morale is indeed closely watched with UBS WM chief economist Paul Donovan noting that the

Fed's Beige Book yesterday expressed concerns about the political environment rather than the

economy itself.

"Economic reality seems firm, sentiment less so," Donovan concluded.

Among the analysts actually putting their necks out and calling wolf are Rabobank who

suspect the Fed has triggered a recession by jumping the gun on rates.

Their 'early warning system' has picked up the yield curve signs and put a 69 percent

probability on a recession by May 2020, noting the "first cracks in the housing market".

Rabobank is no more optimistic for Europe which it sees "already close to recession now" with

gloomy industrial data and potentially more damage from Brexit or the "Yellow Vest" protests.

Here's a link for the Beige Book : https://bit.ly/2VVwT2Z

And here's an elephant outside of a room:

(Julien Ponthus)

*****

BE WARNED: "NOT ALL EARNING DOWNGRADES ARE PRICED IN" (1156)

The earnings season has begun and poor expected results are likely to lead to further

downgrades to 2019 expectations.

But how much of the possible downgrades is already in the prices following the tumultuous

end of last year? Well, Morgan Stanley (Xetra: 885836 - news) strategist Matthew Garman and team strike a note of

caution, warning that: "We don't yet think all the downgrades are in the price".

"Crucial question for 4Q earnings season is how markets will digest the high likelihood of

additional downgrades to 2019 estimates. Earnings revisions typically trough 5 weeks into a

quarter, and last quarter at least, equity markets moved very closely with the state of earnings

season. Cyclical vs Defensive valuations don't yet look that low, and all this means we are not

yet willing to turn too constructive ahead of likely downgrades," they add.

That being said, MS currently forecast 4 percent EPS growth for MSCI Europe this year, more

than half the consensus which remains at 8.3 percent despite earnings revisions recently hitting

a 2.5 year low.

(Danilo Masoni)

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"SELL INTO THE RALLY" (1111 GMT)

Though the mood is more despondent today, European stocks are still fresh from a one-month

high after a global rally driven by slightly stronger economic sentiment and a more dovish Fed.

But Credit Suisse reckons investors should sell into this rally as too many potholes still

remain for markets.

"We continue to see some further upside to markets, but would recommend selling into this

rally rather than continuing to build positions," writes Credit Suisse (IOB: 0QP5.IL - news) 's Andrew Garthwaite and

the global equity team.

So while they see the Eurostoxx 50 rising to 3,200 by year-end and the FTSE 100 hitting

7,300, those gains aren't going to be linear from now.

Garthwaite and team list the following reasons to remain cautious:

* Excess liquidity (the growth rate of M1 money supply minus nominal GDP growth) is now at

its

lowest level since 2010

* Global earnings revisions are now negative, indicating falling equities

* U.S. wage growth has risen to a level implying a small margin squeeze

* U.S. cyclicals do not yet look cheap (unlike in Europe)

* Investment-grade spreads are at "danger levels"

* U.S. corporate leverage is back at its previous peak

The biggest factors to watch from here are China, European PMIs, a more dovish Fed and U.s.

wage growth, they reckon.

On China, they think "a lot of China pessimism is in the price" and remain neutral on mining

and luxury. They also strike a positive tone on China A-Shares (Berlin: DI6.BE - news) which they say are pricing in a

further fall in PMIs and look "very cheap".

One investor also backed China A-Shares earlier this week - read our blog here:

(Helen Reid)

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OPENING SNAPSHOT: TECH AND BANKS PUSH EUROPE INTO RED (0831 GMT)

SocGen's surprise profit warning and a dismal outlook from Taiwanese chipmaker TSMC have

cast a pall over European banking and tech stocks, dragging all major European bourses into the

red in early deals. The banking sector is down 1.5 percent and tech index down 0.5 percent.

SocGen is the top faller on the Paris exchange, down 4.8 percent, after the French bank

warned that Q4 results would be affected by tough market conditions. The downbeat outlook has

underscored deepening concerns about the stricken euro-zone banking sector amid

later-than-expected interest rate hikes and global market volatility.

Deutsche Bank (IOB: 0H7D.IL - news) retraced some of yesterday's rally triggered by a report that European

regulators are averse to a tie-up with its domestic rival Commerzbank (Xetra: CBK100 - news) .

STMicro is the biggest faller in Milan after TSMC flagged its steepest revenue fall in a

decade, joining a string of tech companies to warn of a slowdown in global smartphone demand.

Siltronic (IOB: 0R8P.IL - news) is down 6.5 percent and Infineon (Xetra: 623100 - news) has dropped 2.8 percent.

Media stocks are also getting hit, with the index down 0.8 percent, after BAML downgraded

ITV (Frankfurt: A0BLQP - news) and ProSieben.

London's FTSE 100 is extending yesterday's losses, as markets look to PM May to draw up an

alternative Brexit deal in the coming days without any signs of compromise from the opposition

Labour Party. Her government as expected won a no-confidence vote in parliament overnight.

There's a fair amount of UK corporate news to digest too: from Sage and Primark owner AB

Foods are leading after results, while Whitbread (Frankfurt: WHF4.F - news) is down 2.9 percent after its trading update.

(Josephine Mason)

*****

WHAT WE'RE WATCHING BEFORE THE OPEN (0751 GMT)

European shares are expected to open on the back foot today after a mixed showing in Asia

overnight and as the Brexit focus shifts to UK PM May's efforts to form a consensus in

parliament over a Plan B to leave the EU.

New (KOSDAQ: 160550.KQ - news) frictions over Chinese tech giant Huawei that cast a cloud

over the Sino (Dusseldorf: 1205802.DU - news) -US trade truce also weighed with futures last pointing to losses of around 0.4-0.5

percent across major European benchmarks, FTSE included.

On the corporate front, updates are starting to roll in.

Societe Generale (Swiss: 519928.SW - news) said its fourth-quarter results would be hit by tough market conditions and

the impact of some asset sales, sending shares in the French bank down 3-5 pct in pre-market. A

second profit warning in four months from Voestalpine (IOB: 0MKX.IL - news) sent shares in the Austian steelmaker down

5-7 pct in pre-market. Voestalpine blamed extra costs due to a difficult production ramp-up in

the US and provisions in connection with a German cartel investigation, which also involved

peers ArcelorMittal (LSE: 0NSF.L - news) and Salzgitter (IOB: 0G77.IL - news) .

Elsewhere, German wholesaler Metro (Dusseldorf: 62M.DU - news) posted upbeat Christmas sales (shares up 4 pct

pre-market), while plumbing suppliers maker Geberit (IOB: 0QQ2.IL - news) 's sales growth slowed in line with

expectations during its fourth quarter.

In the UK, software company Sage made a strong start to the financial year with a 7.6 pct

rise in organic revenue (shares up 3 pct pre-market), while the house sector could suffer after

a survey showed the outlook for UK house sales was the weakest on record.

Other stock movers: Primark owner AB Foods holds guidance after revenue rise; Whitbread's

quarterly sales rise 2.4 pct; Experian Q3 organic revenue rises on North America boost; Alstom (EUREX: 2229080.EX - news)

expects to complete Siemens (BSE: SIEMENS.BO - news) tie-up in first-half of 2019; New Beiersdorf CEO hints at action as

sales slow; GVC Sees FY Proforma Underlying EBITDA Ahead Of Market Consensus

For more headlines check out the previous post.

(Danilo Masoni)

*****

HEADLINES ROUNDUP: EYES ON SOC GEN, VOESTALPINE AS UPDATES FLOW IN (0656 GMT)

Turning to the corporate front the earnings earning updates are starting to flow in with

Societe Generale likely to be in focus after the French bank said its fourth-quarter

results would be hit by challenging market conditions and the impact of some asset sales, while

elsewhere in results, steelmaker Voestalpine issued its second profit warning in four

months while sales growth at Geberit was in line with expectations.

Updates also from Aker BP (LSE: 0M5J.L - news) , Metro, Mowi and FACC (LSE: 0QW9.L - news) .

Here's your full headlines round up:

rench bank SocGen's Q4 results to be impacted by market conditions

Geberit reports 2018 sales rise in line with expectations

Voestalpine issues new profit warning, blames extra costs, provisions

Oil firm Aker BP to hike dividend and spending in 2019

Metro reports solid Christmas and slows decline in Russia

FACC Q3 operating profit up 8 pct due to solid demand from planemakers

Top fish farmer Mowi warns Q4 earnings to miss forecast

Bid to keep U.S. sanctions on Russia's Rusal (HKSE: 0486-OL.HK - news) fails in Senate

ECB must avoid "financial distress" in banks' clean up - top EU lawmaker

Bank regulators deem any Deutsche-Commerzbank merger unwise

Germany says Siemens-Alstom (LSE: 0J2R.L - news) deal to help European rail industry compete

French government calls for Renault (LSE: 0NQF.L - news) board meeting to replace Ghosn

India pollution court asks Volkswagen (IOB: 0P6N.IL - news) to deposit $14 mln by Friday - TV

Airbus spends $300 mln on new Alabama plant for A220 jet

(Danilo Masoni)

*****

EUROPEAN SHARES SEEN LOWER AS MAY SURVIVES CONFIDENCE VOTE (0629 GMT)

Indications from spreadbetters point to a weaker start on European stock markets today

following a mixed showing in Asia, where concerns over China's outlook resurfaced, and after

British Prime Minister Theresa May narrowly won a confidence vote overnight.

May then appealed to lawmakers from across the political divide to come together to try to

break the impasse on a Brexit divorce agreement.

"The Prime Minister must bring back a version of the Brexit deal to the House of Commons,

incorporating any modifications negotiated with the EU, by Monday 21 January," notes Goldman

Sachs' Adrian Paul.

Meanwhile, UBS Global Wealth Management continues to advise clients not to touch UK assets.

"If anyone is still paying attention, it is probably best to stay cynical and avoid attempting

to trade unforecastable events," says its chief economist, Paul Donovan.

Financial spreadbetters at IG (Frankfurt: A0EARV - news) expect London's FTSE to open 24 points lower at 6,839,

Frankfurt's DAX to open 27 points lower at 10,905 and Paris' CAC to open 14 points lower at

4,796. For a round up on Global Markets click here:

(Danilo Masoni)

*****