LIVE MARKETS-Short sellers ramp up bets against UK stocks

* European shares extend bounce

* Earnings in focus

Feb 16 (Reuters) - 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: danilo.masoni.thomsonreuters.com@reuters.net

SHORT SELLERS RAMP UP BETS AGAINST UK STOCKS (1154 GMT)

Here's more evidence of the unpopularity of the UK equity market: short sellers now have the

biggest position in UK stocks since Q1 2009, according to research by IHS Markit (Stuttgart: A1139A - news) .

This is a total of 30.8 billion pounds (around $43.4 billion) in short balances, and the

recent sell-off has only fuelled the rise in short positions in the FTSE 350.

According to the report, materials, energy, food & staples retailing groups account for 38

percent of UK short balances.

(Kit Rees)

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WHAT HAPPENED TO EUROPEAN M&A? (1045 GMT)

One big expectation for European equity markets in 2018 was a pick-up in M&A.

Well, we're still waiting: according to Thomson Reuters (Dusseldorf: TOC.DU - news) data, M&A activity in Europe is

actually down 40 percent!

And it's not like the old continent is following a bigger trend, as global M&A is up 14

percent, and it's up 32 percent in the U.S.

It certainly could be a concern for investors looking to invest in merger arbitrage

strategies as a way to hedge themselves against the market swings we have just experienced.

"Merger arbitrage fared very well and matched expectations regarding their ability to

deliver returns uncorrelated with market movements", Lyxor wrote this week, reiterating their

"strong convictions on the strategy".

Here's how they make the case for merger arb:

(Julien Ponthus)

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EQUITY INFLOWS ARE BACK (1010 GMT)

With (Other OTC: WWTH - news) markets rebounding after a sell-off earlier this month, developed market equity funds

tracked by EPFR enjoyed a "smoother ride" during the second week of February, says Cameron

Brandt (Other OTC: BNDT - news) , Research Director at the fund tracking firm, in his latest update.

Europe, Japan and Global Equity Funds all took in over $2.5 billion apiece, offsetting

redemptions from U.S. Equity Funds, he says, adding that Germany, France, Spain, Switzerland and

UK equity funds all took in over $200 million.

One expectation was Italy, which recorded outflows for the 10th week running, as the March 4

general elecion approaches.

In the previous week redemptions from EPFR-tracked Europe Equity Funds hit an 80-week high.

(Danilo Masoni)

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OPENING SNAPSHOT: EUROPEAN SHARES GALLOP AHEAD (0820 GMT)

It looks like investors have turned their attention from bond yields and rising inflation to

the strong earnings picture in Europe, as the STOXX 600 powers ahead this morning thanks to a

slew of well-received company results.

Rounding up a couple of early standout performers, Dutch oil storage company Vopak

, French satellite operator Eutelsat (Paris: FR0010221234 - news) and utility EDF (Paris: FR0010242511 - news) are all up 4 to

12 percent after their updates.

Swedish defence firm Saab (LSE: 0GWL.L - news) is down around 11 percent, however, after proposing a

lower than expected dividend. Danone (LSE: 0KFX.L - news) 's shares are also up only a modest 0.7 percent

following its results for 2017.

Here's your opening snapshot:

(Kit Rees)

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WHAT'S ON OUR RADAR BEFORE THE EUROPEAN OPEN (0749 GMT)

European shares are expected to open higher and snap a three-week losing streak on Friday as

volatility calms down and investors put aside worries over inflation that sparked a heavy

sell-off in global equities earlier in the month.

Futures on top European country indexes were up 0.4-0.6 percent, while the pan-European

STOXX 600 benchmark was up more than 2 percent so far this week. The STOXX however is

still down around 7 percent from the 2 1/2 year peak hit in January.

According to the latest data from Thomson Reuters, European fourth quarter earnings are seen

rising 14.6 percent. That's a big upwards revision from last week's 11 percent growth forecast

and follows 15 weeks marred by a string of downgrades.

The revision has brought Europe to just below the 14.8 percent growth rate expected for the

S&P 500, although "earnings beats" in the U.S. stand at 78 percent vs 50 percent in Europe.

For market moving headlines see the couple of posts below.

(Danilo Masoni)

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CONSUMER STAPLES: FOOD FOR THOUGHT (0741 GMT)

Yesterday we had full-year results from Nestle (Swiss: NESN.VX - news) 's, which dropped after forecasting

only modest organic sales growth, whereas Danone has come out today saying that it is

aiming for further sales and profit growth in 2018.

Analysts are saying that Danone's full-year results have come in slightly ahead of

consensus, but there is still work to be done.

"FY18 guidance is for DD EPS growth, which implies confidence on margins but not necessarily

on the top line. We see good progress being made here, but ongoing negative momentum in Fresh

Dairy testifies to the continuing challenges ahead," analysts at Jefferies say in a note.

It has been a little difficult of late separating stock-specific weakness among consumer

staples from the broader concerns around the impact of rising bond yields on the sector, but as

you can see from the chart below their valuation premium has come down somewhat this year.

(Kit Rees)

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DAX, CAC, FTSE FUTURES EDGE UP (0708 GMT)

European stock index futures have opened with gains of around 0.3 percent, confirming

earlier indications from financial spreadbetters.

(Danilo Masoni)

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EARNINGS DOMINATE EUROPEAN EARLY MORNING HEADLINES (0648 GMT)

We have earnings from top companies like Allianz (Swiss: ALV-EUR.SW - news) , Renault (LSE: 0NQF.L - news) and Eni (Euronext: ENI.NX - news)

this morning but also some fresh dealmaking activity with Roche agreeing to buy

U.S. cancer data company Flatiron Health for $1.9 billion. Here are your headlines:

Allianz Q4 net profit down 22 percent on U.S. tax hit, weak dollar

Renault posts record earnings, strengthening Ghosn's hand

ANALYSIS-As mining investors push caution, Glencore (Frankfurt: 8GC.F - news) differs from rivals

Roche to buy Flatiron Health for $1.9 bln to expand cancer care portfolio

Air France-KLM (LSE: 0LN7.L - news) positive on ticket prices, takes pensions charge

Volatility holds key to bank revenue revival from 2017 slump -survey

Swiss elevator maker Schindler reports in-line 2017 results on stable China demand

BHP Billiton (NYSE: BBL - news) to drill two new deepwater wells in Trion this year

Vopak 2017 earnings fall, but slightly beat expectations

Food group Danone eyes further sales and profit growth for 2018

Lower nuclear output hits EDF 2017 earnings, 2018 rebound seen

Auto parts group Faurecia (Swiss: EO.SW - news) slightly raises 2018 margin goal as profit climbs

Eni (LSE: 0N9S.L - news) releases Q4 update, confirms dividend for 2017

China's HNA Group trims stake in Deutsche Bank (IOB: 0H7D.IL - news) to around 8.8 pct

Shareholders sell $424 million worth of Scout24 (IOB: 0RB8.IL - news) shares

ISS (LSE: 0QRS.L - news) recommends Booker investors vote against Tesco (Frankfurt: 852647 - news) deal

Portugal regulator to further investigate Altice (Other OTC: ATSVF - news) -Media Capital deal

Bollore FY Revenue Up EUR 18.33‍​ Billion

Vivendi (LSE: 0IIF.L - news) 's annual profit rises on strong music revenue

Italy Antitrust probes telecoms companies for billing practices

(Danilo Masoni)

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MORNING CALL: BOUNCE SET TO CONTINUE IN EUROPE (0615 GMT)

Good morning and welcome to Live Markets.

European shares are seen opening higher today following two sessions of gains as worries

over inflation and spiking bond yields that caused a turbulent start of the month ease.

Asian shares rose for a fifth straight day as investor confidence slowly returns after a

sharp sell-off earlier in the month, but the dollar continued its descent, hitting a three-year

low against a basket of major currencies.

"After two successive weeks of sizeable losses for equity markets there was always the

possibility that we’d see a bit of a rebound this week, and so it has proved, though once again

the extent of the rebound has been led by US markets, while markets in Europe have lagged behind

somewhat," writes Michael Hewson, Chief Market Analyst at CMC Markets UK.

Here are his opening calls:

FTSE100 is expected to open 29 points higher at 7,263

DAX is expected to open 46 points higher at 12,392

CAC40 is expected to open 13 points higher at 5,235

(Danilo Masoni)

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