LIVE MARKETS-Small is beautiful

* European stocks on track for first weekly loss in nearly 2 months

* STOXX up 0.4%, bouncing back from 3 week lows

* Euro zone PMI missed estimates 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

SMALL IS BEAUTIFUL (1217 GMT)

At 10.9x 12 month forward price-to-earnings ratio (chart below), FTSE small caps are heavily discounted against their European peers.

Morgan Stanley sees this as an "attractive play" given no-deal Brexit risks have considerably reduced.

Pointing to their pretty high domestic exposure and low valuation, Morgan Stanley says stocks in this space have shown "very little price momentum" in the last couple of months despite the rise in GBP.

The bank is bullish on UK equities as its economists expect the UK economy to rebound strongly next year helped by substantial fiscal stimulus.

MS sees GDP growth rising from 0.4% in in the first quarter of 2020 to 2.3% by the end of the year.

(Thyagaraju Adinarayan)

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"IF IT MAKES YOU HAPPY, IT CAN'T BE THAT BAD" (1014 GMT)

One common practice among stock market reporters is to never use the word "DESPITE" in a headline because readers arguably want to know "WHY" markets are moving up or down and not despite of what.

So with the STOXX 600 cruising peacefully up 0.4% with absolutely nothing particularly joyfully exuberant coming out of this morning's batch of PMI readings, Lagarde's speech, trade war headlines or corporate news, the chorus of the Sheryl Crow 1996 single seemed a good alternatives.

In fact, Euro zone business growth is almost at a halt this month.

So we asked Adrien Pichoud, head of total return strategies at SYZ asset management, what he made of this morning set of indicators and for him, the glass is half full.

"They (PMIs) came out inline with our expectations, we are about to get a stabilization", he said, adding it was rather reassuring that activity was contracting further".

British blue chips midcaps are still up 1.1% and 0.2% respectively and very much umoved by UK businesses suffering their deepest downturn since mid-2016.

Main takeaway for investors?

"I think it is positive for European equity as it removes a big macro downside risk", so they remain quite positive on the prospects of the old continent's stocks which are not "outrageously expensive" and for which they see "mild positive potential".

On the trade war front, Spreadex' Connor Campbell argues that there's a case to see the latest news on the trade front a "completely meaningless" but there again, investors are seeing the glass half full with Xi offering an olive branch to Trump.

A bit of reading to catch with this morning's macro action:

China's Xi says he wants to work out initial trade deal with U.S.

Euro zone business growth grinds to a halt as services struggle

UK businesses slip into deepest downturn since 2016 in Nov

Euro zone bond yields slip after PMIs, shrug off Lagarde speech

(Julien Ponthus and Thyagaraju Adinarayan)

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OPENING SNAPHOT: A BAD DAY FOR EDENRED'S CYBER ATTACK (0833 GMT)

In terms of timings, Edenred's announcement of a cyber attack comes during a very slow news day, which means that the French specialist of prepaid corporate service vouchers has got all the attention (and probably more) it could possibly hope for.

While two brokers gave pre-market indications of only a 1% loss, Edenred share got in fact a brutal 7.5% kick in the chin at the open. It seems to be settling for a 4% slap in the face at the moment.

A few sessions ago, at the peak of the Q3 earnings season, there was a chance that the malaware infection report would be overlooked and buried under a heavy stream of trading updates.

Not today! Edenred is well singled out among the top movers in the STOXX 600 as you can see below:

Regarding the overall markets, European bourses have lifted themselves from three-weeks low with much more vigour than what futures and spreadbetting indications were indicating.

There just didn't seem to be enough concrete news on the trade war front to set a strong directional trend but that didn't stop traders switching on the risk-on gear.

As you can see below, all regional benchmarks are comfortably up, same goes for the vast majority of sectors:

(Julien Ponthus)

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A BIT OF M&A TO SPICE THINGS UP (0745 GMT)

As said below, there isn't much corporate action left in terms of earnings but thankfully, a little spike in M&A activity has emerged to spice things up.

Let's begin a with a Reuters exclusive reporting that Unilever and Henkel were considering bidding for beauty brands from U.S. cosmetics maker Coty.

Vivendi might be ready to offer an olive branch by selling part of its stake in Mediaset at a loss in an attempt to reach a deal to end years of bitter legal disputes with the Italian broadcaster.

After yesterday's fat finger moving its share price, there's a report in the Spanish press that Euronext has hired SocGen and Lazard for a possible bidding war for the Madrid bourse.

In Germany a consortium seeking to buy wholesaler Metro's <B4B.DE Real> chain has beefed up its offer for the hypermarkets.

The country biggest residential property firm, Vonovia, has seen its "full and final" offer for Sweden's Hembla rejected.

It's the other way around in terms of countries with Sweden's Pandox acquiring Hotel properties in Germany for 290 millions euros.

On a more administrative touch Roche has again extended the deadline for its tender offer for Spark Therapeutics, the Swiss drugmaker said on Friday, saying U.S. and British anti-trust authorities needed more time to review the deal.

(Julien Ponthus)

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MORNING CALL: OFF LOWS? (0625 GMT)

European stock markets might just rise up from three-week lows at the open after a gentle recovery lifted Asian shares overnight over hopes (we've been there before though!) China and the United States will strike a preliminary trade deal.

Financial spreadbetters expect London's FTSE to open 25 points higher, Frankfurt's DAX to up 39 points and Paris' CAC to gain 13 points.

While it's quiet on the corporate earnings front with the season dying out, there's quite some action on the macro front with PMIs for France, Germany, euro zone and the UK.

"The uncertainty surrounding Brexit has caused an economic malaise in the UK, and investment has tapered off, so the reports will provide an insight into the health of the British economy", David Madden, a market analysts at CMC Markets wrote to his clients.

(Julien Ponthus)

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