LIVE MARKETS-One man's dividend cut is another's M&A war chest!

* STOXX slightly up (+0.5%)

* Oil and gas stocks surge

* No rebound for banks

* Investors brace for U.S. job data

* U.S. futures rise Welcome to the home for real-time coverage of European equity markets brought to you by Reuters stocks reporters. You can share your thoughts with Thyagaraju Adinarayan (thyagaraju.adinarayan@thomsonreuters.com), Joice Alves (joice.alves@thomsonreuters.com) and Julien Ponthus (julien.ponthus@thomsonreuters.com) in London.

ONE MAN'S DIVIDEND CUT IS ANOTHER'S M&A WAR CHEST! (1128 GMT)

Shares in European banks have taken a beating after they bowed to regulatory pressure by scrapping their dividends and keep the cash aside as an precautionary capital buffer.

But let's be optimistic for a while and imagine that European lenders, which have typically more than doubled their capital cushions since the GFC, end up not needing the money.

One would expect the money to eventually make its way back to shareholders right?

Well, how about CEOs make better use of it?

Analysts at Jefferies looked at asset managers Amundi and DWS, which are both majority-owned by Credit Agricole and Deutsche Bank respectively.

"We think there is a good argument that the cash could be better used as part of a war chest in the pursuit of value accretive M&A, assuming takeout multiples remain accommodating", they wrote.

One potential target for Amundi could be SocGen's Lyxor Asset Management, they report.

For DWS, Jefferies analysts see its management "actively evaluate M&A opportunities", but expect it "to prioritise successful delivery of its self-help programme".

(Julien Ponthus)

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UBS Q&A ON CORONAVIRUS-INDUCED RECESSION (1108 GMT)

In a note this morning UBS economists and strategists try to answer some tough questions by investors on the coronavirus-induced recession. Most of the answers point to never seen before kind of damage but also a much quicker bounce back. Here are some excerpts:

1. Is this worse than the GFC shock?

"GFC was a hit from Wall Street to Main Street. This is the reverse. This is a very large exogenous shock, not a balance sheet recession. Housing, banks and leverage are less extended than pre GFC. 2020 growth will be worse than 2009 growth, but the recovery will be much quicker."

2. Will the fiscal and monetary stimuli help the market bottom?

"The amount of fiscal stimulus is larger than at the GFC. Monetary stimulus, as measured by the change in real rates, is much smaller. The market needs earnings visibility, not an earnings trough, to bottom. S&P earnings should recover quicker than the rest of the world."

3. How high will unemployment go?

"We see US unemployment peak at 14.7%."

4. What is a likely worst-case scenario for global equities?

"Earnings could fall 40%+ in the US and over 50% ex-US if extended shutdowns deepen/lengthen the growth contraction, with 2021 earnings potentially ~15% and ~25% below 2019 levels. Trough multiples should be well higher than at the GFC (i.e. 14-15x for S&P 500). 1,900-2,100 a strong support for S&P 500, in our view. Europe and EM declines could be larger"

5. What level might defaults in the US rise to?

"We expect $500bn of US corporate credit to default over the next year, with 11% and 14% default rates in high-yield and leveraged loans. US HY may hit 1,250bp by Q3."

(Thyagaraju Adinarayan)

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HOW WILL PEOPLE SPEND THEIR MONEY AFTER THE LOCKDOWN? (1041 GMT)

Companies facing the Herculean task of planning a medium term business plan might be wondering how the world will look like once shops and restaurants will be back in business and people will be free to hang out with others.

How consumer behaviour could change after Covid-19?

You would guess people would rush to bars and pubs for a drink, but Barclays says it is not convinced consumers will quickly forget about coronavirus once the health emergency is over and simply revert to their regular consumption.

"Consumer behaviour will be significantly impacted by declining GDP, higher unemployment and the prospects of another global economic downturn," it says in a note.

The UK bank's strategists expect the economic fallout to be as severe as the 2008-09 recession, "albeit briefer".

This is the main behaviour changes seen by Barclays after the lockdowns:

- Less business travel and more working from home

- Greater focus on hygiene

- Less willingness to eat and drink out

(Joice Alves)

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A REPEAT OF MARCH? FASTEN YOUR SEATBELTS (0858 GMT)

The first trading day of the second quarter and it feels like diving yet again into the painful depths of March. U.S. stocks dived more than 4% and is now roughly 11% away from the March lows.

While some of those losses could be explained by the lower than usual volumes during the Q1 rollover, Alexander Altmann, head of equity trading strategy at Citigroup believes markets are primed for more losses until there is a noticeable turnaround in investor sentiment in the bond market as evident from the spread between investment grade and high-yield debt.

Moreover, analysing what markets have done relative to the 200-week moving average during recessions, there is more room for stocks to fall. Average declines from those levels to the bottom in the past four episodes was roughly 63% vs 36% now.

Time to fasten your seatbelts!

(Saikat Chatterjee)

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U.S. JOBLESS CLAIM: YOU KNOW NOTHING (0847 GMT)

Very rarely (hopefully at least) will you see such a broad range of estimates for an economic indicator. A Reuters poll for U.S. initial jobless claims shows estimates between 1.5 million and 5.25 million and a consensus of 3.5 million against 3.28 million last week.

But uncertainty actually runs wilder than that: Goldman Sachs has revised its estimate and now expects 6 million.

Yep, 6! To put things in perspective, the last record in 1982 was below 0.7 million.

There's actually quite a lot of analysts waiting for a bad surprise. Chris Bailey, at Raymond James noted "a likelihood that weekly US jobless claims will be in the region of 5.5m".

DB, for which initial job claims has become a "real-time indicators for markets right now as to what’s going on in the economy" was a more consensual 3.3 million.

Anyhow, the key question is obviously how markets would react to such figures given that last week, the massive layoffs didn't stand in the way of a rally on Wall Street.

"Markets gave the jobless data a free pass last week, will they do the same this time around if the number is once again much higher", asked Craig Erlam, an analyst at OANDA Europe.

Here's a screenshot of the Reuters consensus:

(Julien Ponthus and Thyagaraju Adinarayan)

AT THE OPEN: OIL STOCKS JUMP, NO REBOUND FOR BANKS (0742 GMT)

Oil and gas stocks are leading European bourses today amid surging oil prices and hopes Saudi Arabia and Russia could soon reach a deal to end their price war.

The sector is up over 5% and lifting the broader indexes thanks to heavyweight majors such Royal Dutch Shell gaining close to 9%.

The broader pan-European STOXX 600 rose initially by a cautious 0.5% but gradually slowed down -0.2%.

Travel & Leisure and leisure stocks, which have become somewhat of a 'greed and fear" gauge in the coronavirus crisis are clear laggards.

There's no rebound in sight for European banks which had a very bad session on Wednesday with a 5.8% drop due to a flurry of dividend cuts. Lenders are up 0.3% but that's not much of a catch-up.

British mid-cap stood out with a 0.5% dip at the open, but it is gaining some ground now. The FTSE 250 was dragged down notably by Hays, one of the world's biggest recruiter, which announced an emergency 200 million pound to prop up its finances.

(Julien Ponthus)

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ON THE RADAR: TEXTBOOK CORPORATE CORONAVIRUS HEADLINES (0634 GMT)

Still no clear trend yet for European stocks as investors brace for another likely spooky record week for U.S. jobless claims.

In the meantime, it’s 'same old' in terms of corporate news this morning in Europe with another batch of dividend cuts, executive bonus cuts (Daimler, Sodexo) , guidance dropped and job/production freezes (Volkswagen in Mexico).

One of the most spectacular headline on the latter is British Airways expected to announce suspension of about 36,000 of its employees.

Another illustration of what has become the textbook reaction to the crisis, France’s Engie scrapped its 2019 dividend and withdrew its 2020 guidance.

Note however that Switzerland is resisting the dividend cut trend with private bank EFG International confirming its dividend and joining the ranks of Swiss lenders going ignoring pressure from regulators.

What’s quite encouraging however Pernod Ricard raising 1.5 billion euros through a bond sale which will be used to refinance bank debt facilities.

There’s also some optimism on the oil front with Trump saying he expects Saudi Arabia and Russia to reach a deal soon to end their oil price war.

But there’s absolutely no shortages of signs of financial stress with Investment manager Royal London suspending dealings in property funds.

On the broader M&A front, Novartis scrapped the sale of its U.S. dermatology and generic pill assets to India's Aurobindo Pharma after failing to get approval from a U.S. regulator.

Here's the a link to the top news for European companies:

(Julien Ponthus)

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MORNING CALL: WAIT AND SEE (0528 GMT)

European futures are just slightly in the red at the moment while their Wall Street peers are trading close to 1% up after yesterday's tumble.

One piece of positive news is crude oil futures jumping after Trump said he expected Saudi Arabia and Russia to reach a deal to end their oil price war.

But with investors bracing for another likely record week of U.S. jobless claims, there's no reason to rush into risk assets just now.

The mood in Asia remained very cautious overnight with MSCI's broadest index of Asia-Pacific shares outside Japan falling 0.5% and Japan's Nikkei down 1.2%.

(Julien Ponthus)

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(Reporting by Danilo Masoni, Joice Alves, Julien Ponthus and Thyagaraju Adinarayan)