LIVE MARKETS-Italy: shrinking debt is wishful thinking

* European shares fall from October highs

* HSBC down as 2018 profit disappoints

* Italian banks down after poor economic data

Feb 19 - 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

ITALY: SHRINKING DEBT IS WISHFUL THINKING (1034 GMT)

Poor Italian industrial order data has cemented worries over a slowdown in the euro zone's

third largest economy, triggering new selling pressure on its government bonds and pushing the

yield spread with the safer German bund into an intraday dive.

"Industrial orders didn't help," says a trader, noting that the move was clear for BTP

futures and may also have weighed on Italian banking stocks, which are packed with

sovereign bonds.

But more longer term what's the outlook for Italy's debt sustainability following the recent

budget deal with the EU?

UBS (LSE: 0QNR.L - news) has addressed this question and advises investors to remain watchful.

"The positive impact of lower budget deficit promises (which appear optimistic in

any case) has been fully offset by the weaker macro outlook... stable or rising debt

level is still a more likely outcome than the declining baseline assumption of the government,"

they say.

UBS points to the following signposts going forward:

* Official 2018 budget outcomes will be released by Eurostat in April, along

with the

new Stability Programmes

* Watch any signs of further growth weakness, such as the PMIs

(Danilo Masoni)

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OPENING SNAPSHOT: FATIGUE IN EUROPEAN SHARES, AUTOS AND BANKS SLIDE (0830 GMT)

There's an unmistakeable sense of apathy in European trading this morning with the STOXX 600

down 0.1 percent from yesterday's four-month high. After a 12 percent rise since Dec (Shanghai: 600875.SS - news) 27 it's

perhaps unsurprising that investors are cashing in their gains in European shares.

Autos and bank shares are down 0.4-0.5 percent as tension over potential U.S. tariffs on

cars rises.

It certainly can't be helping that Germany's Economy Minister has said the "most difficult

part" in EU-U.S. trade talks lies ahead.

Wirecard (IOB: 0O8X.IL - news) is leading gains for a second day after BaFin banned shorts on the stock. It's up

7.7 percent at the top of the STOXX, helping the tech sector rise in a falling market.

In moves after results, HSBC is down 3 percent after reporting a disappointing annual profit

due to higher costs and a stocks rout.

It's dragging Standard Chartered (BSE: 580001.BO - news) down along with it.

Danish medical equipment supplier William Demant (LSE: 0RGT.L - news) is down 6 percent after its earnings missed

expectations.

Pandora (LSE: 0NQC.L - news) shares are down 3.6 percent after broker Carnegie, among the top-ranked

analysts covering the stock, initiated a trading sell.

Heidelbergcement (IOB: 0MG2.IL - news) was a strong gainer after results, up 4 percent after forecasting higher

demand for cement this year, shrugging off concerns about trade wars and a disorderly Brexit.

(Helen Reid)

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ON THE RADAR: HSBC, DANONE AND THE INFAMOUS VEGAN SAUSAGE ROLL (0752 GMT)

European futures are flat at the moment and cautious optimism on the Sino (Dusseldorf: 1205802.DU - news) /U.S. trade talks

is expected to help continental bourses hold the line at 4-month highs.

There is however a feeling all could go very wrong very quickly should Trump open a Western

front and announce tariffs on German luxury cars. The sector is also under the spotlight with

Honda shutting its UK plant.

In the meantime a fresh batch of earnings is keeping traders busy.

First (Other OTC: FSTC - news) indications on HSBC’s results are not good with a number of brokers calling the Q4

figures disappointing but on the bright side, the outlook is seen encouraging. Premarket

indications show the bank’s shares should go down.

Still on the banking front, apart from the current hopes of a new round of T-LTRO, note our

story saying Italy has started discussions with the EU over the renewal of a state guarantee

scheme designed to help banks shed bad loans.

Another big British blue chip is BHP Group which Citi says is "in line but nothing to get

excited about", the stocks are seen retreating at the open.

The broker seems more excited about France’s Danone (LSE: 0KFX.L - news) which it says delivered “a strong beat”

but premarket indications are not clear at this stage.

Last but not least the Vegan Roll is back on top news with Greggs (Stuttgart: 41G1.SG - news) seen rising 3-5 percent at

the open. See:

(Julien Ponthus)

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NO DENYING FUTURES ARE FLAT (0711 GMT)

Very rarely are all main European futures unanimous on the direction of the trading session

but here you go: it's all very very flat:

(Julien Ponthus)

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THE LINE HOLDS (FOR NOW) (0627 GMT)

European bourses are expected to open just very slightly up this morning, with financial

spreadbetters expecting London's FTSE to open 8 points higher, Frankfurt's DAX up 11 points and

Paris' CAC to gain 9 points.

Nothing much has changed on the trade war front but cautious optimism about the Sino/U.S.

talks should help European shares trade on highs not seen since October.

There's quite a lot of Q4 results already coming in to animate the session (HSCB, Danone...)

as well as important indicators (Germany ZEW Economic Sentiment).

The mood from Asia was roughly the same with shares hovering near four-month highs as

expectations of policy stimulus from central banks also lifted sentiment.

In other news, here's Paul Pogba's goal against FA Cup holders Chelsea which helped secure a

a place in the quarter-finals for Manchester United (NYSE: MANU - news) .

Here's a link to our slideshow: https://reut.rs/2Sbefkv

(Julien Ponthus)

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