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LIVE MARKETS-The 'real' valuation debate

* European shares retreat after a two-day rally

* STOXX down 1.2%

* Britain's blue chips down 1.6%

* Oil & gas companies leading losses 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.


THE 'REAL' VALUATION DEBATE (1013 GMT)

As earnings and dividends are slowly being revised downwards and there's a lot more uncertainty down the road, it's very hard to measure valuations.

The 12-month forward price-to-earnings ratio relies on a bottom-up consensus and that tends to move slowly -- a month or two behind market pricing, Goldman Sachs says.

With the U.S. bank's top-down estimates assuming a 45% drop in earnings, "the picture does not look good," as it points to a 12 month forward P/E of a whopping 23x (on a bottom-up basis it currently stands at 13x and the long-term average has been 14x).

The comparison gets even uglier when looking back at the GFC when it was around 9.5x.

Goldman Sachs expects valuation trough to be much higher this time around as:

** "central banks and fiscal authorities have moved fast, decisively and in size"

** "this shock is not systemic in the way that the GFC was seen at the time, nor as bad as the sovereign crisis"

** "Bond yields are lower now than in all the previous trough periods"

(Thyagaraju Adinarayan)

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EUROPE MORE ATTRACTIVE THAN U.S.? (0955 GMT)

Can the U.S. equities leadership be challenged now as countries try to tackle the virus outbreak with unprecedented measures?

European shares have beein underperforming the U.S. for a long time now:



But now things could turn a little.

"Despite sizeable fiscal stimulus, the welfare system in the U.S. might provide less cushion to the private sector compared to Europe," write Barclays analysts.

And here are more details why the British bank prefers Europe over U.S. equities:

- The U.S. market's growth/quality nature remains an advantage, but the end of the buybacks super-cycle is a problem

- U.S. too exposed to FAANG stocks, Europe more "old economy" dominated by financials, industrials, materials and staples

- Oil price collapse likely to be more problematic in the U.S.

- Europe offers a ‘cheap’ option on a potential 6-12m recovery

- The EPS growth distance between U.S. and Europe is expected to narrow in 2020

- Euro has weakened recently, which is a positive for the Exporters basket. Barclays forecasts stable EURUSD down the road.


Additionally, Barclays also prefers EU over UK stocks as the euro zone has a "more diversified sector composition", lower exposure to oil, and faces lower dividend risk than the UK.


(Joice Alves)

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SHARES RETREAT AS EURO ZONE DELAYS CRISIS PACKAGE TALKS (0754 GMT)

European shares are back in negative territory after a sharp two-day rally as European finance ministers struggle to agree on the coronavirus-crisis package.

Earlier today, the EU finmin meeting was suspended until tomorrow, as Italy and the Netherlands have not reach a common ground over conditions attached to euro zone credit for governments to fight the epidemic.

The pan European index is down 1% with energy, banks and insurers leading the losses. Aviva and Direct line are among top losers after they scrapped dividends.

Britain's blue chips are also 1% lower. Tesco started the session at the bottom of the index, down 7%, but has since cut some losses.


(Joice Alves)

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ON OUR RADAR: TESCO, DIRECT LINE AND MORE DIVIDEND CUTS (0645 GMT)

After a two-day rally for European shares, futures point to a lower open today as investors are turning more cautious ahead of EU finmin meeting. On the corporate front, Covid-19 continues to hit earnings and dividends: Direct Line withdrew its final 2019 dividend, while Swedish lockmaker Assa Abloy said its operating earnings fell steeply in Q1 as the coronavirus outbreak hit its Asian business.

Deutsche Post, Heineken and Relx scrapped their outlook.

Swedbank meanwhile said it will report a Q1 loss due to rising costs, credit impairments and a previously announced fine after a money laundering-related investigation.

In the UK, Britain's biggest retailer Tesco expects coronavirus costs to hit 925 million pounds and warns it is unable to give a profit forecast for this financial year.

We could see some action among toilet-paper makers as two of the world's biggest pulp makers say transportation logjams are delaying shipments of the raw material used to make the much sought after white gold.


(Joice Alves)

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VIRUS WORRIES DRIVE SENTIMENT (0537 GMT)

Futures point to a slightly lower open for European bourses after two days of gains as investors could temper their earlier optimism about the coronavirus outbreak.

After European stocks closed comfortably higher yesterday with gains from March bottom at a staggering 22%, investors are turning cautious.

The S&P 500 as well as Asian shares stepped back, as death toll in the U.S. jumped by a record 1,800.

Meantime, oil price continues to climb as traders hope producers will cut output in a meeting between OPEC members and allied producers on Thursday.


(Joice Alves)

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