LIVE MARKETS-Sticking with Facebook

* European stocks hit lowest level in more than 1 year

* Eyes on Chinese response to Trump tariffs

March 23 - 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

STICKING WITH FACEBOOK (1227 GMT)

The tech giant's data fiasco has had investors, especially those with an ESG mandate,

re-evaluating their holdings given the scope for tighter regulation of social media firms and

questions raised over Facebook (NasdaqGS: FB - news) 's grip on its users' data.

But Shoaib Zafar, senior analyst at SYZ Asset Management, said that they are remaining

invested in Facebook and still see its valuation as attractive.

"On the positive side, with FB’s deep pockets, the company is in good shape to carry out

meaningful investments in areas where it needs to improve without hurting its operating or net

incomes," says Zafar in a note, citing the likelihood that FB will be able to improve free-cash

generation in the year following heavy investments.

As per the chart below, FB's valuation is now just trading just at a very slight premium to

its broader sector - is this cheap enough to tempt all investors?

(Kit Rees)

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"WINNERS AND WARNERS" - TAKEAWAYS FROM THE UK RESULTS SEASON (1212 GMT)

After an earnings season thick with profit warnings and sharp stock falls, Liberum's rundown

of UK results finds that large-caps have underperformed while small-caps have done well, growth

has done better than value, and domestic stocks have beaten international earners.

The increase in sterling is of course part of the dynamic delivering greater strength to

domestic stocks, in a turnaround from the post-Brexit vote pattern of pound weakness puffing up

dollar-earners.

Defensive sectors have had a worse performance than cyclicals, with fewer beats than misses.

Insurance, staples and pharma were all weak, Liberum strategists note.

Perhaps surprisingly, housebuilders showed the strongest positive pattern this season, they

say, while support services has also been positive, followed by media and capital goods.

They see the most likely "winners" as mid-cap domestic growth and small-cap domestic

cyclical value stocks, while "warners" are more likely to be found among large-cap value

international earners, mid-cap international earners, and small-cap defensives.

Those who've been arguing international dollar earners are a safe hiding place from Brexit

and domestic risk could be in for a nasty surprise.

(Helen Reid)

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HOW COULD CHINA RETALIATE? (1104 GMT)

Despite the rhetoric, analysts appear to agree that China for now is unlikely to respond

aggressively to Donald Trump's first tariff move as the world's second largest economy is seen

as having the most to lose from any escalation.

China unveiled on Friday its own plans to impose tariffs on up to $3 billion of U.S.

imports, a "mild" response - to use the words of Michael Every, strategist at Rabobank.

But it could do more and investors in global risky assets may want to closely monitor

Beijing's next steps to assess the risk of a full blown trade war hurting economic activity.

TD Securities strategist Mitul Kotecha has listed possible other counter measures that China

could take from interventions on the bond and forex markets to geopolitical build up measures:

* "Other potential retaliatory measures by China could include selling part of the country's

massive $1.18 trillion holdings of US Treasuries. That said, the safe haven bid has been more

compelling so far ... This type of retaliation seems unlikely."

* "Another potential form of retaliation is to weaken the CNY, compensating for some of the

pressure experienced by Chinese exporters. However, we don't think Chinese officials will opt

for this approach. Any (sharp) weakening of the CNY could lead to a resumption of capital

outflows from the country while adding pressure on Chinese corporates."

* "Finally, China may also step up tensions from a geopolitical perspective by intensifying

its activities in the South China Sea, something that will provoke the ire of the US

administration (and the Asian region more broadly)."

Meanwhile a Reuters exclusive has revealed that a U.S. warship is sailing near disputed

islands in South China Sea, prompting China to say that provocative behaviour will only cause

the Chinese military to strengthen its defence capabilities.

Watch these spaces!

(Danilo Masoni)

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POSITIONING PORTFOLIOS FOR A TRADE WAR (1019 GMT)

Protection against a potential trade war is the order of the day - but how are investors

putting this in place? UBS (LSE: 0QNR.L - news) chief investment officer Mark Haefele says his asset allocation

remains "pro-risk" but he advises investors consider equity put options to reduce portfolio

volatility.

UBS also holds counter-cyclical positions: "an overweight in 10-year U.S. Treasuries, and an

overweight in JPYNZD, that should perform if the market starts to price in a full-scale trade

war."

Defensives are also cited by several brokers as a good bet in this climate.

"We have advocated that this, alongside evidence of peaking sentiment indicators, warrants a

rotation away from cyclical risk assets into more defensive ones, which are better insulated

against a deterioration in global trade," write UniCredit (EUREX: DE000A163206.EX - news) analysts.

Their central scenario, like many others', sees retaliation likely to be contained.

(Helen Reid)

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"THE MOST UNSTABLE TRADE FRAMEWORK SEEN SINCE THE SECOND WORLD WAR" (0949 GMT)

European steel shares are tumbling even though the industry has just been let off the hook

for most of Donald Trump's U.S. import tariffs (Outokumpu (EUREX: 472618.EX - news) -7.5 pct, Tenaris (Amsterdam: TS6.AS - news)

-4.1 pct, ArcelorMittal (LSE: 0NSF.L - news) -3.8 pct).

The exemptions are far overshadowed by the escalating trade tensions between the Trump

government and Beijing, which raise the spectre of an open trade war that would hit economic

activity around the world.

"The key impact to the (European steel) sector, in our view, does not relate to any

specifics around new tariffs (although individual commodity dislocations will likely emerge) but

to the stability of the global economy, and especially China's economy," say RBC analysts.

Jefferies agrees: "With (Other OTC: WWTH - news) tariffs clearly targeting Xi Jinping's "Made (Paris: FR0010328302 - news) in China 2025"

cherished sectors, Trump is risking a dangerous trade war, which would inevitably damage global

steel demand."

The U.S. - China trade stand-off also ratchets up the risk for the U.S. steel industry, to

which many European steelmakers have direct exposure through local production sites.

RBC calls it "the most unstable trade framework seen since the Second World War" but says

China's response is likely to be measured, which will keep a lid on the overall impact for now.

(Tom Pfeiffer)

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TRADE FEARS TAKE EUROPEAN STOCKS TO 7-MONTH LOW (0816 GMT)

The STOXX 600 has hit its lowest point since the end of August last year in early trading,

as it catches up with overnight losses in the U.S. and Asia.

It's far from being calm on the corporate front too: Indivior (Frankfurt: 2IVA.F - news) is sinking 22 percent

after the U.S. court ruling against the maker of opioid addiction treatment Suboxone. The UK

firm said it intends to appeal the ruling in favour of generic competitor Alvogen.

GSK is a rare gainer on the STOXX, up 4 percent after it, too, pulled out of the

bidding for Pfizer (NYSE: PFE - news) 's consumer health business, following in the footsteps of Reckitt

Benckiser earlier this week.

Basic resources (Frankfurt: W8Z.F - news) , tech and banks are the worst-performing sectors.

(Helen Reid)

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WHAT WE'RE WATCHING BEFORE EUROPE'S OPENING BELL (0755 GMT)

European shares are set to fall close to their early March lows with the mounting trade war

jitters pushing futures on main euro zone benchmarks down around 1 percent.

Remaining above those levels may indicate that the level of concern is still contained.

"We do not expect a full-blown trade war, but the risk of escalation may lead to bouts of

risk aversion in financial markets," said Credit Suisse (IOB: 0QP5.IL - news) in its investment daily.

Futures on the UK's FTSE index, which yesterday ended at a 15 month low, were down 0.5

percent.

The trade war concerns are likely to result in a broad based sell-off, leaving little room

for single stock movers.

On the corporate arena, traders said German sports wear group Adidas (IOB: 0OLD.IL - news) could find support in a

better than expected trading update from U.S. rival Nike (Sao Paolo: NIKE34.SA - news) , while shares in specialty

pharmaceutical company Indivior are called down 5 to 20 percent following an adverse ruling in a

patent infringement litigation case.

Next (Frankfurt: 779551 - news) shares are seen gaining after it kept profit guidance unchanged in its annual

results. A trader summarises the sentiment: "No profit warning, decent short interest, and peers

have been weak".

Investors will also keep an eye on Italian stocks as its new parliament convenes to vote for

their speakers, while Spain will also be watched ahead of a possible sovereign rating upgrade by

S&P after the marker closes today.

Stock movers: E.ON, RWE (IOB: 0FUZ.IL - news) have no merger plans - CEOs in German paper; Novartis (IOB: 0QLR.IL - news) touts U.S.

filing plans for MS drug as patent losses loom; Deutsche Bank (IOB: 0H7D.IL - news) to reap $1.7 bln from asset

management IPO; Telecom Italia pre-empts Elliott with board resignations; Enel (LSE: 0NRE.L - news) ordinary net

profit beats guidance

(Danilo Masoni)

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EURO ZONE STOCK FUTURES DOWN MORE THAN 1 PERCENT (0722 GMT)

Futures for the German, French and Spanish stock benchmarks are pointing to losses of more

than 1 percent, although it looks like the scale of the losses will not be enough to push them

below the lows hit during the late February sell-off.

DAX futures, for example, are now down 1.3 percent. That would bring the German benchmark to

11,940 points, still above its most recent low. An earlier indication from CMC Markets (LSE: CMCX.L - news) of a 200

points opening loss would still keep the DAX above that low.

Meanwhile FTSE futures are down 0.7 percent.

(Danilo Masoni)

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EUROPEAN EARLY MORNING HEADLINE ROUNDUP (0641 GMT)

Here are you top early morning headlines, although trade war jitters will likely cause a

broad sell-off today, leaving little space for single stock movers.

E.ON, RWE have no merger plans - CEOs in German paper

Novartis touts U.S. filing plans for MS drug as patent losses loom

Deutsche Bank to reap $1.7 bln from asset management IPO

Dutch wholesaler B&S shares priced at 14.50 euros in IPO

Dutch NIBC bank shares priced at 8.75 euros in initial public offering

Telecom Italia (Amsterdam: TI6.AS - news) pre-empts Elliott with board resignations

Credit Suisse CEO pay falls in 2017

Adidas rival Nike forecasts reversal in N. America sales decline, tops estimates

Enel ordinary net profit beats guidance

Swiss watchmakers make up for lost time as China sales tick higher

EU leaders tell social networks to guarantee users' privacy

EU plans tougher consumer laws for Facebook, Gmail

(Danilo Masoni)

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MORNING CALL: DAX SEEN LOSING 200 POINTS AT THE OPEN (0616 GMT)

The sell-off seen yesterday in Europe on mounting worries that U.S. tariffs on China imports

could escalate into a full-blown trade war is set to continue today with the same intensity.

Trump signed a presidential memorandum on Thursday that could impose tariffs on up to $60

billion of imports from China, although the measures have a 30-day consultation period.

All eyes are now on the response from China, which urged the U.S. on Friday to "pull back

from the brink", and unveiled its own plans on Friday to impose tariffs on up to $3 billion of

U.S. imports.

Raboank Senior Asia-Pacific Strategist Michael Every said China's retaliation measures so

far are mild: "Is China acting dovish to try to negotiate its way out? Is it waiting to pounce

at a future date on US aviation and agri exports? Or does it have far less trade leverage than

many had assumed?"

"Note (Stockholm: NOTE.ST - news) that the soybean market has not reacted significantly. That points to something also

stressed in the special report: China would shoot itself in the foot by boycotting US soy, as it

would force food-price inflation through the roof," he said.

Meanwhile in Asian hours, the rumblings of a global trade war shook stock and currency

markets, sending MSCI (Frankfurt: 3HM.F - news) broadest index of Asia-Pacific shares outside Japan down

fell more than two percent.

Here are your morning calls for Europe, courtesy of CMC Markets.

FTSE100 is expected to open 67 points lower at 6,885

DAX is expected to open 200 points lower at 11,900

CAC40 is expected to open 77 points lower at 5,090

(Danilo Masoni)

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(Reporting by Danilo Masoni)