LIVE MARKETS-Rotation into value? Might not take much

* European shares sharply higher, STOXX up 1.1 pct

* China March factory activity unexpectedly grows

* UK parliament votes on Brexit options at 1900 GMT

* EasyJet launches Brexit warning, DSV to buy Panalpina

* Wall St opens higher on trade progress, China data

April 1 - Welcome to the home for real-time coverage of European equity markets brought to

you by Reuters stocks reporters and anchored today by Danilo Masoni. Reach him on Messenger to

share your thoughts on market moves: rm://danilo.masoni.thomsonreuters.com@reuters.net

ROTATION INTO VALUE? MIGHT NOT TAKE MUCH (1433 GMT)

Negative bond yields are shaping market action these days and Barclays believes that value

stocks could be in for some tactical buying as the safety plays that benefit from low rates now

look a pretty crowded and expensive trade.

"Flight to safety accelerated in March with bonds & cash seeing further inflows while equity

market internals turned defensive. Quality/growth stocks are in demand, but value is out of

favour," strategists at the UK bank led by Emmanuel Cau say.

"Growth/Value valuation dispersion is at extreme levels... It might thus not take much of a

bounce in bond yields to trigger some near-term rotation into value," they add in their latest

strategy piece.

As you can see in the chart, the PE relative of growth vs value is the highest in 13 years -

a gap that could play in favour of the less expensive and neglected corner of the market.

(Danilo Masoni)

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BREXIT AFTERSHOCK (1243 GMT)

Counter to what you'd expect given the mounting uncertainties over Brexit, the Netherlands

has increased its exposure to the UK economy, leaving it more vulnerable to any trade and

migratory aftershocks from the process, a S&P Global Ratings analysis shows.

From the end of 2015 to end-2018, Dutch exports to the UK rose by nearly 0.6 percent of GDP

and Dutch banks are still carrying high exposure to UK counterparties, the report says. S&P has

tracked the level of risk by country since two weeks before the referendum in June 2016 in what

it calls its Brexit Sensitivity Index (BSI).

Ireland and Luxembourg still top the list, but the Netherlands has moved up four places to

the third most vulnerable economy.

The BSI measures goods and services exports to the UK, bidirectional migrant flows,

financial sector claims on UK counterparties on an ultimate risk basis and foreign direct

investment (FDI) in the UK. S&P has tweaked its methodology slightly to more accurately reflect

financial linkages between the European economies and the UK.

Portugal is also included for the first time, but ranked 16, reflecting its relatively low

exposure stemming from low FDI and financial sector claims on the UK, despite significant export

and migratory exposures.

Compared with end-June 2016, the banking systems of Belgium, Germany, Ireland, and

Switzerland have cut their exposures to UK counterparties -- a trend in place long before Brexit

was contemplated.

In contrast though, since the referendum, banking systems in the Netherlands, France, and

Spain have increased their UK business, when measured on an ultimate risk basis.

At the same time the financing of the country's large external deficits has shifted away

from FDI towards portfolio equity and debt.

S&P reckons that shows concerns about the consequences of Brexit for the UK have led to a

weaker global and European appetite to make long-term investments in the British economy.

"This is something to watch, in light of the UK's current account deficit of 5 percent of

GDP, the second highest in the world in absolute terms," it says.

(Josephine Mason)

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Q1 WAS MEMORABLE... NOW WHAT? (1150 GMT)

After a disastrous Q4, a remarkable Q1 followed for markets and Deutsche Bank has done a

nice recap showing the solid performances recorded across the board.

"The first quarter of 2019 will undoubtedly go down as one of the most memorable on record

given the sheer broadness of positive total returns across asset classes," say Deutsche Bank

strategists Craig Nicol and Jim Reid.

Their highlights include WTI Oil (+32.4 percent) and the S&P 500 (+13.6 percent) with both

posting their best quarter since Q2 2009.

U.S. HY (+7.5 percent) posted its best quarter since Q4 2011, the Shanghai Comp (+23.9

percent) since Q4 2014 and the STOXX 600 (+13.3 percent) since Q1 2015.

On top of that 11 assets ended Q1 with double-digit returns, the most since Q1 2012, they

say.

The stark contrast between Q1 and Q4 has come even as worries over the global economy, trade

and political risks in Europe don't seem to have settled down.

One may thank the Fed's U-turn but now that this appears to be priced in, making an

assessment on what's next for markets is quite a difficult exercise. (Check out our story this

morning on this:)

"The multi-billion dollar question now is how far can this momentum run into Q2 and beyond,"

the DB strategists say.

(Danilo Masoni)

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SHOOTING FOR THE MOON (1100 GMT)

A new space race is heating up following U.S. vice president Mike Pence's call to NASA last

week to put astronauts on the moon again within five years.

That's some four years earlier than NASA's own target.

The move was partly inspired by China's robotic lunar landing mission earlier this year

while Israeli nonprofit SpaceIL also has its sights set on a robotic landing in April.

Whoever ends up ahead, the modern-day space race is a big opportunity for investors with a

2024 timeline for a manned lunar mission requiring significant government spending.

Not surprisingly, the bank says it prefers aerospace, satellite and communications segments,

while new space startups may offer investment opportunities in private markets.

(In November, NASA named nine U.S. companies, including Lockheed Martin Corp, that

would compete for funding under the space agency's renewed private-public partnership for

developing technology to explore the lunar surface.)

But it's the value the bank puts on the space economy that's eye-catching.

UBS reckons it could grow to almost $1 trillion in the next couple of decades from $340

billion currently.

To put that into context, that's the same as the GDP of the Netherlands or Turkey.

In a previous note on the potential economy of space travel and tourism, UBS estimated that

by 2029 space tourism could be a market worth $3 billion per year and growing at double digits.

Below is their timeline on how this could pan out:

(Josephine Mason)

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WANNA PLAY NEGATIVE BOND YIELDS? OPT FOR HIGH-DIV (0947 GMT)

With 10-year Bund yields back in the red following the recent policy shifts by central

banks, quality and high-div stocks are back on the radar screens with investors pondering which

one is better placed to benefit from the latest shift in market conditions.

Morgan Stanley would put their money on high-div.

"We prefer to play low bond yields through High Dividend Yield stocks rather than Quality as

valuations are much less demanding," analysts at the US bank say in a note.

"Quality has been the biggest beneficiary of low bond yields in this cycle but going forward

we prefer the risk-reward of High Dividend Yield stocks," they add.

They also highlight that buying high dividend stocks is not necessarily a defensive, low

beta trade.

"Buying dividend stocks isn't an entirely defensive strategy as sectors that currently have

the highest dividend yield in the market are a mix of traditional defensive (Utilities,

Telecoms) and high beta/cyclical sectors (Banks, Energy, Autos)," they note.

That being said, they update their high & secure dividend yields basked.

Within this basket of 41 stocks, 18 are rated overweight: DNB, KBC, Lloyds

, Siemens, Rexel, BAE Systems, Saint-Gobain,

Volkerwessels, Greene King, BP, Total, AXA, Direct

Line, Covestro, Merlin Properties, Evry, Orange

and Iberdrola.

To conclude here's an MS chart showing that the UK and Europe offer the highest 12-month

forward dividend yield in the DM world after Australia.

(Danilo Masoni)

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CHINA DATA POWERS UP EUROPE (0801 GMT)

Data showing that factory activity in China unexpectedly grew for the first time in four

months in March has ignited a rally in European shares at the open, lifting the STOXX 600 up 0.9

percent in a broad-based bounce led by cyclical stocks.

"Some thankfully better than forecast data from China set the European markets up for a

decent open as April got underway," says Connor Campbell, analyst at Spreadex.com.

The export-oriented auto sector is up an outstanding 2.9 percent, with activity

peppered up by ongoing talk about possible deal-making in the industry, while among other

cyclicals, basic resources stocks are up 2.4 percent and banks up 1.1 percent.

Defensive sectors are underperforming but only utilities are trading in the red,

down 0.1 percent, while a 7 percent fall in easyJet (after the airline warned that

demand and pricing were suffering from Brexit jitters) kept its sectoral index around

parity.

All country indices are trading in positive territory in early deals.

(Danilo Masoni)

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WHAT'S ON OUR RADAR BEFORE THE OPEN (0652 GMT)

European shares are set to rise sharply on the first trading day of the second quarter with

stock index futures rising 0.8 percent following unexpected growth in Chinese factory activity

in March. FTSE futures are up 0.2 percent ahead today's parliament votes on different Brexit

options.

On the corporate front, Panalpina is expected to rise as much as 15 percent at the open

after Denmark's DSV agreed to buy the Swiss freight forwarder in a share swap valued at 4.6

billion Swiss francs.

Still in dealmaking, Fiat Chrysler could rise further (up 1-2 percent premarket) after

Bloomberg reported that PSA Group and the Italian American carmaker are exploring a partnership

to share investments to build cars in Europe, while oil services firm Saipem could also get a

lift from media speculation it could exit its drilling business.

In earnings, traders said a better-than-expected update from Apple supplier Foxconn could

help lift shares of European suppliers of the U.S. tech giant, such as AMS and Dialog Semi or

STMicro, while Easyjet could fall 3-5 percent at the open after giving a cautious outlook for

the second half of the year. A sequential rise in Macau gambling revenue could

support shares in Asia-exposed luxury stocks.

Here are some UK headlines (check out the previous post for other headlines):

EasyJet warns of Brexit hit to European demand

Network International announces pricing for up to $3bln listing

Cabot Energy sees higher FY revenue

Joules Group ceo will retire before end of FY 2020

Britain's Serco extends contract with Dubai Metro for up to $185 mln

Thames Water Submits Revised Business Plan For 2020-2025

Astrazeneca: Selumetinib gets breakthrough therapy designation

Ferrexpo Updates On Review Of Charity Donations, Delays Results Again

-MJ Gleeson Says Appointed Lazard To Explore Options For Strategic Land Business

Failed LK Bennett chain circled by Ashley, Dune and Feng https://on.ft.com/2HTgx7k

Novartis pays $310 mln upfront for inflammation specialist IFM

(Danilo Masoni)

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FUTURES RALLY, EYES ON PANALPINA-DSV (0614 GMT)

European stock futures have opened sharply, up 0.4-0.9 percent, confirming earlier

indications from spreadbetters for a strong start of the second quarter following an unexpected

growth in Chinese factory activity in March.

On the corporate front, Panalpina is on the watchlist after Denmark's DSV

agreed to buy the Swiss freight forwarder in a share swap valued at 4.6 billion Swiss francs.

Meanwile talk about a possible dealmaking in the auto sector contines with Bloomberg

reporting at the weekend that PSA Group and Fiat Chrysler are exploring a

partnership to share investments to build cars in Europe.

Here's your early morning headlines roundup:

Denmark's DSV to buy logistics company Panalpina in $4.6 billion deal

PSA Group and Fiat Chrysler explore European venture - Bloomberg

Rio Tinto cuts 2019 iron ore shipment outlook after cyclone

Wirecard says compliance manager's departure not connected to investigation

ECB extends mandate for Italian bank Carige's administrators to Sept. 30

Daimler asks EU antitrust regulators to probe Nokia patents

(Danilo Masoni)

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EUROPE SEEN STARTING Q2 ON THE UP ON STRONG CHINA DATA (0550 GMT)

European shares are expected to start the first session of the second quarter on the up

after China's official purchasing managers' index released on Sunday showed factory activity

unexpectedly grew for the first time in four months in March.

Financial spreadbetters expect London's FTSE to open 32 points higher at 7,311,

Frankfurt's DAX to open 98 points higher at 11,624 and Paris' CAC to open 42

points lower at 5,393, a trader said.

Over in Asia, stocks rallied as the positive Chinese factory gauges and signs of progress in

Sino-U.S. trade talks boosted sentiment, although another defeat for British Prime Minister

Theresa May's Brexit deal added to sterling's woes.

The British Parliament will vote again on different Brexit options later today and then May

could try one last roll of the dice by bringing her deal back to a vote in parliament as soon as

tomorrow. Parliament is due to vote at around 1900 GMT.

(Danilo Masoni)

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