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LIVE MARKETS-Are there more good things to come for Europe?

Jan 23 (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

ARE THERE MORE GOOD THINGS TO COME FOR EUROPE? (1528 GMT)

Despite the prospect of an end of quantitative easing, rising oil prices and a stronger

euro, Shweta Singh, director global macro at TS Lombard, reckons there might be "more positive

surprises in store" for the euro area.

And this is thanks to ease of financing (see chart below), strong consumer confidence,

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increasing capex and a broad-based recovery which looks "increasingly self-sustaining" and

leaves room for more upgrades.

(Kit Rees)

*****

CROSS-BORDER M&A IN EUROPEAN TELCOS IS NOT IMMINENT (1436 GMT)

Goldman Sachs (NYSE: GS-PB - news) has also weighed in to the telco M&A developments we mentioned earlier, but

they sound a rather less optimistic note than Deutsche Bank (IOB: 0H7D.IL - news) .

The cross-border strategic rationale for pan-European consolidation in telcos is "limited

but growing", write analysts. Cross-border M&A is not imminent, but they do see opportunities in

the more medium term.

"Until investors become more confident in the sustainable benefits of 'digital divergence'

cost-cutting, we do not see a material re-rating potential for the sector as a whole from this

cross-border consolidation theme," they add.

And of course there are still political obstacles. "Governments still, for the most part,

see telecoms networks as strategic assets and therefore may attempt to prevent any deals between

companies." Indeed those concerns may have been part of what halted talks between Orange (LSE: 0OQV.L - news) and

Deutsche Telekom (IOB: 0MPH.IL - news) last year, as our story detailed.

"We continue to see in-market, fixed-mobile convergence-based M&A as more imminent," GS

analysts add, recommending TDC (LSE: 0MOP.L - news) , Vodafone and Liberty Global (Frankfurt: A1W0FL - news) .

Regardless, the hope of dealmaking has already helped the telcos sector push into

positive territory year-to-date. The only remaining sectors that are down since January are real

estate, and food & beverage.

(Helen Reid)

*****

DOES IT MAKE ANY SENSE TO HOLD BITCOIN IN PORTFOLIOS? (1350 GMT)

Quant strategists at Bernstein tackle the question on everybody's lips: does it make any

sense to hold bitcoin in portfolios?

Their answer, in short, is no.

"How to say anything sensible about future returns? We cannot value bitcoin like an equity

or a bond as it has no cash flows. We also cannot value it like a fiat currency as it has no

interest rate (at least not yet)," write Bernstein's Inigo Fraser-Jenkins and team.

One benefit of the cryptocurrency is its tiny correlation to any other asset class (see

below) - but given how incredibly volatile it is, Bernstein analysts conclude it would have to

reliably return a whopping 5 percent per month to have a meaningful weight in a portfolio.

And the environmental footprint of bitcoin mining should turn off any investor with an ESG

bent.

"The very significant power consumption may attract the attention of regulators, but even

before that, we cannot imagine that any pension fund which has stated an ESG goal - e.g. many

across northern Europe - would be able to allocate to bitcoin in any way," notes Bernstein.

Bitcoin is currently trading around $10,366 - nearly half its value at its peak on Dec (Shanghai: 600875.SS - news) 17

.

(Helen Reid)

*****

NETFLIX VS EUROPEAN MEDIA IN TWO CHARTS (1324 GMT)

Netflix (Xetra: 552484 - news) shares have scaled to fresh record highs in premarket trading in the U.S.

after the video streaming service trounced Wall Street targets for new subscribers in the fourth

quarter.

That marks a stark contrast with the fortunes of European media, which have lost two

thirds of their value from the all time peak they hit in 2000, underling the structural

challenges of traditional players fighting against online rivals and changing audience habits.

Looking at the short term, however, the outlook for European media looks a bit brighter.

"Following a tumultuous 2017 marked by earnings disappointments and contracting multiples,

we see a brighter outlook for earnings growth in 2018 against a strong macro backdrop and a more

favourable events calendar, but multiples remain at risk as secular challenges persist," say

Goldman Sachs analysts.

In the two charts you can see how Netflix's spectacular share price compares with the

sluggish perfomance of European media over the last few years and how the streaming service is

now worth nearly half of Europe's media index.

(Danilo Masoni)

*****

MORE SIGNS BANKS HAVE FURTHER TO GO (1316 GMT)

Analysts at Northern Trust Capital Markets see another sign that the gains in European banks

could go further.

One of these is the new high on the five-year Euro inflation-linked swap rate, which has had

a close correlation with European banks (see chart below).

"Bank stocks are slowly making new highs on very little news flow. Perhaps this is

reflective of the ongoing style rotation, one we suspect has further to run," Gary Paulin, head

of institutional brokerage, EMEA and APAC at Northern Trust Capital Markets, says in a note.

Today banks are down slightly, however.

(Kit Rees)

*****

CANNABIS: IS 1,000 PERCENT HIGH ENOUGH? (1253 GMT)

The global legal cannabis market is set to grow over 1,000 percent to reach 140 billion

dollars by 2027, investment bank Bryan, Garnier & Co writes in an in-depth report it just

published about the industry.

"Not only is there already a sizeable black market to take share from but legalisation

itself seems to be creating its own momentum," the report says, highlighting that the

legalisation of cannabis worldwide is creating a "rapidly expanding industry".

There's more than pharmaceutical products: "for alcoholic drinks, cannabis beverages could

potentially deliver the same benefits ("high") without the traditional negatives (calories,

hangover)," the investment bank writes.

Bryan, Garnier & Co recommends three Canadian stocks as investment opportunities : Canopy

Growth, Aurora Cannabis (Frankfurt: 21P.F - news) and Aphria (Berlin: 10E.BE - news) .

See Reuters' latest story on the subject: "Canada's small financial firms get buzz from weed

stocks"

(Julien Ponthus)

*****

WARMING UP TO GREECE (1214 GMT)

Lyxor Asset Management are overweight Europe, and say they like sectors which have been

lagging in terms of valuation, such as consumer discretionary, construction and small caps.

Jean Baptiste Berthon, senior cross-asset strategist at Lyxor AM, also says they are

becoming increasingly overweight in Greek equity ahead of a debt renegotiation, even though

they're aware the Greek indices have a heavy weighting in banks.

"We think it's clearly not over for Greece. It has a lot of leeway to catch up, so Greece in

our view has really become interesting, even though the restructuring will take many more years

than the market anticipates," Berthon says.

(Kit Rees)

*****

VIEWS FROM THE STREET: WILL FOX-SKY DEAL STILL GO THROUGH? (1127 GMT)

Twenty-First Century Fox was gearing up for its $15.7 billion takeover of Sky (Amsterdam: BK8.AS - news)

but the UK competition and markets regulator (CMA) today threw a spanner in the works,

saying the deal would jeopardise media plurality in the UK.

"Quelle surprise," Neil Campling, co-head of the global thematic group at Mirabaud

Securities, writes of the not entirely unexpected ruling.

But there are chinks of light for those hoping the deal will go through: the CMA set out

possible remedies to its concerns including a sale or spin-off of Sky News, and appointing

independent directors for the company.

Sky (Frankfurt: 893517 - news) 's shares are rising to their highest since the deal was announced (at a modest 4.2

percent discount on the £10.75 offer price), suggesting investors are optimistic.

"It is only on plurality grounds that the CMA has concerns, and that is a fixable situation

as per the olive branches being offered through a range of potential remedies, whereas concerns

on broadcasting standards would likely have been a complete deal breaker," Campling adds, noting

the CMA found in favour of Fox's broadcasting standards.

Others are less hopeful. Liberum downgraded Sky to 'hold' this morning, saying there is a

greater risk of the deal - a major driver of its 'buy' case - not occurring.

"The language of the CMA in its provisional findings suggests they are more minded to

blocking the deal as a way of addressing concerns," Liberum analysts write. They now see a 40

percent chance the deal doesn't go through.

Fox meanwhile is sticking to its guns, saying it anticipates approval of the deal by June

30. Our colleagues over at BreakingViews also reckon the bid will ride out the regulatory storm:

(Helen Reid)

*****

BACK FROM REGULATORY TRIP, CITI SEES TAILWINDS FOR EUROPE'S BANKS (1119 GMT)

Banks have been stand-out outperformers in Europe so far this year, up 7 percent, and while

the surge in bond yields and economic growth surprises have been the key driver, easing worries

over regulation also played a role.

Adding to the upbeat mood over the sector's regulatory prospects is a note today from

analysts at Citi, who just got back from a regulatory trip in Europe.

"Last week we met with EU, Eurozone, German and French policy makers. We visited the EU

Commission, Bundesbank, the French Central Bank, the French Treasury and banking experts. Our

main takeaways... point to a constructive regulatory stance towards the European banks, which is

positive for the sector," they say.

One of their key points is the lengthy implementation of the so-called Basel 3.5/4 rules

which should benefit Benelux, Nordic and French banks the most. Citi has a buy rating on KBC

, ABN, ING, BNP (Paris: FR0000131104 - news) , Credit Agricole (Swiss: ACA.SW - news) , SocGen (Paris: FR0000130809 - news)

, Danske and Jyske.

(Danilo Masoni)

*****

DEUTSCHE BANK CONFESSES TO "INVESTMENT HERESY" (1044 GMT)

"We commit ‘investment heresy’", DB analysts admit in their latest research, as they take an

unconventional (contrarian?) view on consumer staples.

In a nutshell the German investment bank disagrees with the common wisdom that "rising U.S.

10-year treasury yields = sell staples".

DB analysts make the case that in fact, European staples are "ultimately correlated to the

yield of the currency in which they report". They, accordingly, have "buy" ratings on a number

of stocks such as Nestle (Swiss: NESN.VX - news) and Heineken (LSE: 0O26.L - news) .

(Julien Ponthus)

*****

M&A, WHETHER "REAL OR IMAGINED", WILL BOOST TELCOS SECTOR (1016 GMT)

Long-awaited consolidation deals could be a driving force behind a brighter year for the

European telcos sector, Deutsche Bank analysts say, the day after Orange and Deutsche

Telekom shares were boosted by a report they had held merger talks last year.

"Reports that Deutsche Telekom was in talks with Orange would appeal to the European

Commission which has long argued for a single market for Telco services, and what better

demonstration than a merger of French and German incumbents," note analysts.

Whether ramping M&A is 'real or imagined', it will help inject more optimism into telcos,

they say, with smaller operators, including those with limited government ownership or more

flexible governments, likely to gain from increased deals speculation.

Overall they're positive on the sector which they think will do well in 2018 after two years

of underperformance drove its valuations sharply down, making them relatively attractive. DB's

top sector picks are Vodafone, Telenet (LSE: 0GAF.L - news) , KPN (Amsterdam: KPN.AS - news) , Telefonica (LSE: 826858.L - news) and

Liberty Global.

(Helen Reid)

*****

BREXIT WATCHERS, WHAT DO YOU MAKE OF BLANKFEIN'S LATEST TWEET? (0947 GMT)

The CEO of Goldman Sachs, which has yet to announce precise plans as to how it will move

staff from the City of London (LSE: CIN.L - news) to Frankfurt and Paris post-Brexit, has just delivered some high

praise to France's Macron after a meeting in Versailles. (Reuters was there:)

"Feels like a new day has dawned in France," Lloyd Blankfein tweeted, leaving Brexit

watchers speculating whether this is a hint as to where the bulk of the London jobs will go.

Last October, the CEO caused some English eyebrows to rise with this tweet: "Just left

Frankfurt. Great meetings, great weather, really enjoyed it. Good, because I'll be spending a

lot more time there. #Brexit"

(Julien Ponthus and Helen Reid)

*****

OPENING SNAPSHOT: DAX AT NEW RECORD, STRONG POUND WEAKENS FTSE (0809 GMT)

As expected European shares have opened in positive territory with the pan-regional STOXX

600 index edging up 0.3 percent.

The outstanding mover however is the DAX. The main German stock index has hit a

fresh all-time high and is up 0.8 percent, while Britain's FTSE looks the weakest among

big European indexes after the pound reached a post-Brexit vote high.

(Danilo Masoni)

*****

WHAT YOU NEED TO KNOW (0749 GMT)

European shares are set for a strong start in the wake of the rally, which took place in

Asia and on Wall Street following the deal to end the U.S. government shutdown.

After yesterday’s M&A-fuelled session, there is little corporate news at this stage but

faith in “global synchronised growth” should continue lifting indexes to new highs.

Among possible movers is Sky: Britain's competition regulator said Rupert Murdoch buying all

of Sky was not in the public interest because it would give the media mogul too much influence.

Also EasyJet said recent reductions in capacity by competitors in the industry were

contributing to a positive trading environment, as revenues improved in the first quarter.

Still in the industry, Wizz Air (Frankfurt: WI2.F - news) is keen on Alitalia (Stuttgart: 2278962.SG - news) but only for short, medium-haul routes.

Here are a few other interesting headlines:

Netflix crosses $100 bln market capitalization as subscribers surge

Trump deals blow to solar makers; forcing industry to look elsewhere for growth

Sweden's Com Hem Q4 underlying EBITDA just beats forecasts

SGS (LSE: 0QMI.L - news) expects sales growth in 2018 after FY profit rises

Niki Lauda to buy airline he founded, say administrators

Carrefour CEO steps up digital push, inks deal in China

Paragon (IOB: 0NFG.IL - news) 's Q1 lending rises as buy-to-let focus pays off

(Julien Ponthus)

*****

TRUMP'S SOLAR TARIFFS TO HIT EUROPE TOO (0734 GMT)

U.S. President Donald Trump announced late yesterday tariffs on some imported solar cells,

boosting shares in U.S. solar companies but hitting rivals in Asia, such as Korean solar panel

manufacturers.

There could be victims in Europe too, such as Germany's SMA Solar Technology (IOB: 0NIF.IL - news) ,

which develops photovoltaic system technology.

"This could bother SMA's already difficult US business furthermore. SMA hosts CMD Friday

maybe giving some insight soon," a Frankfurt-based trader said.

Another trader said also shares in Solarworld (IOB: 0QJC.IL - news) , REC Silicon (LSE: 0FS8.L - news) , Solar A/S (LSE: 0G33.L - news)

, Soitec (Paris: FR0004025062 - news) and Solar-Fabrik could be under pressure following

Trump's move.

(Danilo Masoni)

*****

FUTURES POINT TO A STRONG START FOR EUROPEAN BOURSES (0706 GMT)

There seems to be little doubt as to whether European shares will follow the rally in Asia

and on Wall Street which followed the deal to end the U.S. government shutdown:

(Julien Ponthus)

*****

AN ECB CHEAT SHEET: FROM "VERY DOVISH" TO "VERY HAWKISH" (0650 GMT)

As Thursday's ECB meeting quickly approaches, ING has drafted a "cheat sheet" to help

investors read through Mario Draghi's carefully scripted language and decide whether his message

is "dovish" or "hawkish".

Here it is:

(Julien Ponthus)

*****

MORNING CALL: EUROPE TO RISE IN THE WAKE OF U.S. SHUTDOWN DEAL RALLY (0618 GMT)

Good morning and welcome to Live Markets. European shares are set to open higher on Tuesday

in the wake of the rally on Wall Street and Asia which followed a deal to end a three-day

government shutdown in the U.S.

Financial spreadbetters expect London's FTSE to open 18 points higher at 7,733.1,

Frankfurt's DAX to open 54 points higher at 13,517 and Paris' CAC to open 17 points higher at

5,558.5.

(Julien Ponthus)

*****

(Reporting by Danilo Masoni, Helen Reid, Kit Rees and Julien Ponthus)