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LIVE MARKETS-Think of inflation like the dotcom bubble

* European shares rise

* STOXX hits May 2015 high, 1.5% below record high

* Investors await clearer news on possible trade deal

* U.S. grants Huawei new 90-day license extension 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




THINK OF INFLATION LIKE THE DOTCOM BUBBLE (1223 GMT)

Market strategist Kevin Muir, author of the Macro Tourist newsletter, has left East West Investment Management and now wants to make a big contrarian bet.

"My goal is to create a fund that will take advantage of what I believe to be the next major market disruption - a return of inflation and a breaking of the negative correlation between stocks and bonds", he wrote to his followers.

"In 1981 no one could imagine inflation doing anything except go higher. Today we are at the opposite extreme", he believes, adding that because so few investors are positioned for a come-back of inflation, "protection is dirt cheap".

To those who will argue that it is usually dangerous to be right too early, Muir replies that keeping on betting on lower inflation "would be like someone buying the Nasdaq 100 index at the turn of the century". An excellent short term investment but a disastrous one just a few quarters down the line when the index for what was promised to be a new economy completely collapsed with the bursting of the dotcom bubble.

In both cases, he argues, the risk-reward is "completely skewed to the downside".

But of course it goes both ways: betting on higher inflation has been a horrible trade until just recently.

Austria's infamous 100 year bond saw its yield fall from above 2% to less than 0.6% in less than two years...

Not a trade you would have wanted to be on the wrong side of even if common sense (or what feels like it) seemed to scream, at say 1%, that the yield was way too low for a product which will live longer than the vast majority of Austrians.

Here's the chart for Austria's 100 year benchmark and the slope from above 2% to below 0.6%:


(Julien Ponthus)

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WORLD STOCKS NEAR RECORD HIGHS AMID 2020 UPGRADES (1009 GMT)

Four little points is all it would take to lift the MSCI All country World Index to its highest level ever as a wave of upgrades from banks and asset managers in their 2020 equity outlooks fuels bullishness across the world.


Here in Europe, the STOXX 600 is back at May 2015 highs and less than seven points from its April 2015 record of 415.18 points.

Other milestones are in touching distance, such as the 6,000 points threshold on the CAC 40: that's just about 0.7% away.

Looking at Wall Street, yet new fresh records look quite likely again with S&P futures trading (again!) at their highest levels ever.

The only trepidation out there, as one says in our newsroom, is that the rally is wholly dependent on a trade deal being sealed by the U.S. and China by the next tariff deadline of Dec 15.

(Julien Ponthus)

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OPENING SNAPSHOT: STOXX BACK TO JULY 2015 HIGHS (0845 GMT)

European shares are positive at the open with the STOXX 600 climbing back to its highest since July 2015, helped by gains across most sectors, as investors appeared hopeful about progress in trade talks between the U.S. and China.

"Overall, we think the chance of a complete breakdown in talks is now lower, and the chance of a positive resolution – potentially including a rollback of tariffs – is higher," says Mark Haefele, CIO at UBS Global Wealth Management.

"Political pressure ahead of the 2020 elections is rising, and a workable agreement would enable President Trump to 'declare victory' ahead of the vote. Meanwhile, monetary policy and fundamentals are also now more supportive and we have adopted a neutral stance overall on equities," he adds.

Among top STOXX movers, satellite operator SES is down 20% after the Federal Communications Commission in the U.S. said it backed a public auction to free up spectrum in the C-Band for next-generation 5G wireless networks.

Well-received results are driving in London-listed Halma , ICG and Homeserve up 8.8%, 6.2% and 5.2% respectively, while Sonova in Zurich is down 4% as margins missed expectations, offseting an upgrade to its outlook which ZKB said is already reflected in consensus estimates.

Meanwhile, Madrid bourse operator BME, at the centre of a takeover battle shares were up 1.8%, extending yesterday's 38% surge.

Here's your opening snapshot.

(Danilo Masoni)

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ON OUR RADAR: BATTLE FOR BME, GERMAN REAL ESTATE, EARNINGS (0755 GMT)

European shares are seen rising slightly at the open, helped at the margins by news that the U.S. has granted Huawei a longer-than-expected 90-day license extension, although the region's top index remains stuck in its recent tight range, just below record highs, pending clearer news on whether the U.S. and China will strike a preliminary deal to end trade war.

EuroSTOXX50, DAX, FTSE, CAC and IBEX futures are up 0.2-0.5%.

On the corporate front, eyes on the bidding war for Madrid bourse operator BME which could heat up further after Spanish newspaper La Informacion said Deutsche Boerse is mulling a bid for BME following competing moves by SIX and Euronext to take over their smaller Spanish rival.

German real estate could also grab some attention due to M&A action. Shares in TLG Immobilien are up 1.5% in early Frankfurt trade after agreeing to merge with Aroundtown SA in an all-share transaction.

In earnings, news is mixed.

Sonova lifted its FY 2019/2020 sales and profit outlook after the hearing aid maker said a new device took market share from rivals in H1. Its shares are seen up 2%.

Private bank Julius Baer said it was unlikely to achieve its target of 4-6% growth in net new money this year due to outflows from funds at its Italian subsidiary Kairos. Plans for a 400-million-francs share buyback could sweeten the disappointing earnings update.

Dialight could be hit hard after the lights manufacturer warned on its annual operating profit, hit by the Sino-U.S. trade spat which has led to uncertainty around the timing of orders from its customers.

(Danilo Masoni)

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MORNING CALL: LITTLE CHANGED (0628 GMT)

European shares are expected to open little changed, hovering at striking distance from their past record highs, as investors await clearer news on whether the U.S. and China will strike a preliminary deal to end a drawn-out trade war.

Spreadbetters at IG expect London's FTSE to open 6 points higher at 7,314, Frankfurt's DAX to open 9 points higher at 13,216 and Paris' CAC to open 5 points higher at 5,934.

Over in Asia, shares were mixed.

(Danilo Masoni)

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