LIVE MARKETS-What lies ahead?

* European shares reverse early gains; STOXX 600 down 0.5 pct

* Asian shares fragile on US-China trade worries

* London down 1 pct, set for worst day since late March

* Eyes on results, dealmaking

* Thomas Cook jumps as Lufthansa pounces on Condor airline unit

May 7 - Welcome to the home for real-time coverage of European equity markets brought to you

by Reuters stocks reporters and anchored today by Helen Reid. Reach her on Messenger to share

your thoughts on market moves: rm://helen.reid.thomsonreuters.com@reuters.net

WHAT LIES AHEAD? (1050 GMT)

London traders have come into work in what's going to be short week for UK markets and found

that President Trump's trade threats have already set the tone. But as it looks like Sino-U.S.

talks are still going ahead, let's look at what else is on markets' minds this week.

For starters, the latest positioning numbers from CFTC are illustrative.

They show short positions on futures for the VIX -- the so-called fear gauge of Wall

Street -- at a new record, surpassing the build-up seen before last February's "Volmageddon"

blowup.

But rock-bottom volatility is a feature across asset classes; a gauge of cross-asset vol

compiled by brokerage INTL FcStone stands 3.6 standard deviations below the mean. In other

words, it deems that a vol surge has less than a 0.02 percent probability of occurring.

With that has come willingness to go short 'safe' assets such as gold or Treasuries. But as

Volmageddon showed, vol can spike spectacularly in quiet markets, sometimes driven by just one

unexpected data point. After all, it's May and if the old adage holds, some people will be

looking to sell and go away.

As for data there's plenty of that coming up -- U.S. and Chinese trade numbers, German

industrial orders, UK GDP and U.S. inflation -- may show economic recovery is underway. Or not.

And what of central banks? Fed boss Powell disappointed markets by not mentioning rate cuts

last week, but his peers in other countries may oblige.

Malaysia cut rates on Tuesday for the first time since 2016 and New Zealand could do so

tomorrow. Australia kept rates steady but only just - markets price two cuts by end-2019. Dovish

signals seem inevitable from Thailand and Philippines later this week.

To read more on world market themes click

(Sujata Rao)

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"MORE BEARISH THAN IT LOOKS" (1030 GMT)

An early bounce in European stocks has rapidly evaporated, with both the STOXX and the DAX

now down 0.5 percent while the FTSE 100 drops 1 percent.

The short-lived bounce this morning wasn't hugely convincing to begin with: it was

defensive-driven, led by real estate, telecoms, and utilities stocks, a trader notes.

"So the tape (is) actually a bit more bearish than it looks," he writes. "Very tricky to

trade, would expect headline roulette to continue into Friday, and risk taken down."

He saw investors likely buying market protection in the coming days after the VIX spiked to

its highest since January yesterday.

(Helen Reid)

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BANKS: TRADING PROFITS FOR CAPITAL (0945 GMT)

European banks face a lower-for-longer rates scenario and that's not good for margins but

still some lenders prefer selling profitable businesses to beef up their finances -- as fatter

capital ratios could lure back some investors.

An example today is UniCredit.

Italy's largest bank by assets is considering reducing its 35.5-percent stake in its online

unit Fineco.

While not everyone is convinced that exiting Fineco is a wise move for UniCredit, given

Fineco's long-term growth potential, analysts agree that a sale would bolster its capital.

KBW analyst Hugo Cruz estimates a sale of a 10-15 percent Fineco stake could boost its

capital buffer by up to 22 basis points but hit EPS by around 1.0 percent.

But UniCredit doesn't seem to be alone.

Societe Generale last week posted a 26 percent drop in Q1 net profit, but revealed

an increase in its capital position, showing the benefits of a restructuring plan.

"Trading earnings for capital," says Credit Suisse analyst Jon Peace in his take on Soc Gen.

"We have reduced our earnings forecasts for the deleveraging, but our price target is unchanged

given the capital build."

(Danilo Masoni)

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CASH STASH (0902 GMT)

A large number of global investors have been stashing cash under their mattresses - a survey

by UBS finds that 32 percent of portfolios globally were allocated to cash.

But they won't hold that for too long as the recent rally in global markets helped them turn

optimistic and "hungry for opportunity", as per the UBS Global Wealth Management survey.

51 percent of investors are optimistic on the global economy, including 62 percent of

business owners, versus 21 percent of investors who are pessimistic, including 15 percent of

business owners, the survey finds.

Cash holdings in Europe were 35 percent, while in the U.S. it was 23 percent.

"Right now, we see high levels of cash globally. This is a good time for investors to

consider a more diversified portfolio," says Paula Polito, client strategy officer at UBS Global

Wealth Management.

European investors have stayed away from investing due to disappointing growth, political

uncertainty, and weak financial market returns.

"'Buy local' works well for vegetables, but we are more optimistic on the global economy and

this survey confirms investors sometimes focus too much on their home region," says Mark

Haefele, chief investment officer at UBS Global Wealth Management.

Top concerns by region (many of them are obvious):

(Thyagaraju Adinarayan)

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"LARGE-SCALE FISCAL EXPANSION IN EURO AREA LOOKS UNLIKELY" (0850 GMT)

Macro risks in the euro zone are keeping debate over fiscal policy tools alive and when it

comes to public finances, Goldman divides the currency bloc's countries into three groups:

1. Germany (and many small Euro area countries), which have strong public finances and can

boost

spending without risking a period of distress

2. Italy which has little or no room for manoeuvre, as demonstrated by the fierce reaction

to the

measures announced with the 2019 government budget

3. France, Spain and Portugal where additional fiscal easing would likely come with

increased

borrowing costs that partially crowd out the positive impact on aggregate demand

That divergence means that fiscal measures could have opposite market impacts depending on

which country puts them in place, and ultimately supports Goldman's view that the euro zone's

fiscal options are rather limited.

"The degree to which Euro area countries can effectively use fiscal policy as a

counter-cyclical tool remains limited, so a large-scale fiscal expansion in the Euro area looks

unlikely," Goldman's Silvia Ardagna writes.

So what happens when a country with limited fiscal manoeuvre space wants to boost growth

with fiscal tools? Ardagna says governments should consider a mix of cuts to spending and income

taxes plus a boost to public investment.

And if those measures are not enough to avert a slowdown?

Well, more radical measures could come to the fore (such as debt mutualisation, pooling

member-country tax revenues, a "safe asset" bought by the ECB, or even 'helicopter money'),

creating what could be another "Whatever It Takes" moment for the euro area, she adds.

But relax - that's not Goldman's base case scenario...

(Danilo Masoni)

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TRUMP TWITTER TIRADE: MISSTEP OR NEGOTIATING TACTIC? (0835 GMT)

News that Chinese Vice Premier Liu He will still be going to Washington this week for trade

talks has helped soothe markets as investors try to remain positive about trade after Trump's

latest twitter tirade. Some see the move as a strategy to ramp up pressure on China ahead of

talks.

"We think the president's tweet likely still fits into the category of late-stage

negotiating tactic rather than discussion-breaking ultimatum," write BNP Paribas Securities'

U.S. economist Andrew Schneider and data scientist Joel Alcedo.

"One of the factors supporting our expectation of the U.S. side moving to a deal is the

president has been sensitive to equity markets, which have been themselves sensitive to the

status of U.S.-China trade negotiations," they add.

Only time will tell if they're right!

With the deadline for action on tariffs on European autos also fast approaching (May 18),

BNP Paribas is also relatively upbeat about the outcome of that, saying they see the president

as likely to announce, but ultimately not implement, tariffs on cars.

Here's their flow chart of the options:

(Helen Reid)

*****

OPENING SNAPSHOT: ILIAD, CELLNEX SHINE WHILE G4S SLIDES (0722 GMT)

Chunky results-driven moves are keeping traders busy at the stock level while Europe's STOXX

600 and Germany's DAX hold on to 0.1-0.2 percent gains, with investors relieved by China's Vice

Premier committing to his trip to the U.S. for trade talks.

The FTSE 100, catching up after yesterday's holiday, is down 0.3 percent.

Dealmaking is also a main driver for top movers Iliad and G4S.

French telecoms group Iliad is top of the STOXX after agreeing to sell its mobile tower

assets in France and Italy to Cellnex for 2 billion euros, in a deal aimed at strengthening its

balance sheet. Spain's Cellnex is also up 6 percent on the deal.

G4S shares are sliding 7.9 percent after Gardaworld said it does not, after all, intend to

make an offer for the company.

Chemicals firm Imerys, on the other hand, is down 6.4 percent after its results

disappointed. In the same sector, Belgium's Solvay is down 4.8 percent after it cut its outlook

due to lower sales and worsening economic conditions.

A bright spot in chemicals, Dutch company DSM gained 4.9 percent after hiking its profit

outlook for 2019.

AB InBev shares are down just 0.4 percent after its slight earnings miss. And temporary

staffing company Adecco is up 2.5 percent after Chief Executive Alain Dehaze said the trend in

European markets stabilised during the first quarter.

(Helen Reid)

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ON THE RADAR: AB INBEV, BMW, G4S, HENKEL, AND CHINA TRADE TALK HOPES (0650 GMT)

European shares are expected to slide on Tuesday after taking a tumble on U.S. President

Donald Trump’s threat to ramp up tariffs on Chinese imports as soon as Friday.

Stress about global trade weighed on European futures but news China’s vice premier Liu He

will visit the U.S. from May 9 to 10 for trade talks helped boost the trade-sensitive DAX

futures to trade flat on the day, having fallen as much as 0.4 percent earlier.

Results from some of Europe’s biggest companies, and the return of UK markets after a

holiday, should keep trading busy.

The world's biggest brewer, AB InBev, confirmed reports it is planning a minority listing of

its Asian business, but the news was overshadowed by Q1 earnings missing expectations, driving

its shares down 1-2 percent in pre-market.

Shares in carmaker BMW are down 1.5 percent in pre-market trading after results which showed

profit fell 78 percent, hit by a 1.4 billion euro legal provision and expenses.

British security company G4S is seen falling as much as 10 percent after Garda World

Security said it will not make an offer for the company.

Germany's Henkel, which makes Schwarzkopf shampoo and Persil detergent, is expected to slide

2 percent after it reported disappointing earnings and sales as its beauty unit lagged in

western Europe and China, and its adhesives business was hurt by falling industrial production.

Adding to the recent slew of results from chipmakers, Infineon stuck to its revenue forecast

(which has been twice lowered already), reporting flat Q2 sales. It's seen down 1 percent.

Italy’s Unicredit said it was considering a sale of its FinecoBank unit and had adopted

measures to ensure the online broker could operate outside the group.

(Helen Reid)

*****

FUTURES SLIDE AS U.S.-CHINA TRADE STRESS WEIGHS (0619 GMT)

European futures are down 0.3 to 0.6 percent as markets struggle to shake off the stress

caused by Trump's threat to raise tariffs on $200 billion worth of Chinese goods to 25 percent

from 10 percent by the end of the week.

As anxiety grips markets, Societe Generale economists strike a hopeful note: "the fact that

the Chinese negotiation team did not cancel its trip to Washington this week suggests an

agreement can still be achieved".

(Helen Reid)

*****

RESULTS: EYES ON AB INBEV, HENKEL, ESSILORLUXOTTICA, INFINEON (0552 GMT)

Tariff threats aside, today's likely to be a busy day of trading with UK markets open after

a holiday and some of Europe's biggest companies reporting.

AB InBev, the world's largest brewer, confirmed reports it is looking into listing a

minority stake in its Asian operations. Its Q1 core profit came in slightly below the forecast

in a Reuters poll.

Eyewear giant EssilorLuxottica kept its full-year outlook unchanged after reporting strong

sales.

But Germany's Henkel, which makes Schwarzkopf shampoo and Persil detergent, reported

disappointing earnings and sales as its beauty unit lagged in western Europe and China, and its

adhesives business was hurt by falling industrial production.

Adding to the slew of results from chipmakers recently, Infineon stuck to its revenue

forecast (which has been twice lowered already), reporting flat Q2 sales.

Here's the early harvest of headlines:

Brewer AB InBev eyes minority listing of Asian business

Infineon confirms twice-lowered guidance for 5 pct revenue growth

Adecco sales slip 1 pct in first three months of 2019

Henkel results disappoint as beauty, adhesives lag

French group Alstom posts higher FY profit, hikes dividend

Evonik Q1 profit slips on start-up costs

Eyewear company EssilorLuxottica maintains outlook as Q1 sales jump

Vonovia raises profit guidance after forecast-beating Q1

Jeweller Pandora Q1 Ebitda Beats Forecast; Keeps Full-Year Guidance Unchanged

(Helen Reid)

*****

FURTHER FALLS FOR EUROPEAN STOCKS AFTER TRUMP'S TRADE THREATS (0526 GMT)

After stocks took a tumble yesterday when U.S. President Donald Trump threatened to raise

China tariffs again (though the fall by the end of the day was just 0.9 percent for the STOXX

600), Europe is expected to fall again this morning with investors still jittery.

Asian shares staggered up from five-week lows overnight but remained fragile after Trump's

latest threat to raise tariffs on Chinese goods shocked financial markets and fuelled worries

that trade talks may be derailed.

Financial spreadbetters expect London's FTSE to open 19 points lower at 7,361,

Frankfurt's DAX to open 14 points lower at 12,273, and Paris' CAC to open 15 points lower at

5,469.

(Helen Reid)

*****

(Reporting by Helen Reid, Danilo Masoni, Josephine Mason and Thyagaraju Adinarayan)