LIVE MARKETS-Towering telcos

* European stocks recover; STOXX 600 up 0.4% * STOXX 600 on track for 0.94% rise on the week * Vivendi, Pearson shine after results * Renault, Michelin latest to deliver bleak outlook on autos * UK housing stocks rise on stimulus hopes * Vodafone has best day in 17 years on mast spin off plan Welcome to the home for real-time coverage of European equity markets brought to you by Reuters stocks reporters and anchored today by Josephine Mason. Reach her on Messenger to share your thoughts on market moves: josephine.mason.thomsonreuters.com@reuters.net TOWERING TELCOS (1309 GMT) Vodafone's plan to spin off its mobile mast operations in Europe, creating the region's largest tower operator, has been warmly welcomed by markets with shares soaring 9% -- their best day since 2002! The news is certainly helping to shake off some of the gloom caused by the 40% cut in their dividend announced in May. Analysts believe the move would "unlock value" driving a share price rally and say the infrastructure business has greater value than their mobile or fixed line. The hived-off part, which potentially could be listed in a stock market, could have an enterprise value at as much as 16 billion euros ($17.8 billion), according to City Index. Towers have been one of the hottest parts of the telecom sector in Europe, with current market leader Cellnex being upbeat on future growth this morning. After spin-off, Vodafone's tower business would overtake Cellnex. Cellnex Telecom, which was spun off from toll road operator Abertis in 2015, has doubled in value in the last two years. (see the chart below). The appeal investors is rising data usage among consumers, particularly in cities. "Continued densification to cope with the 50-70% pa mobile data usage growth and expansion of coverage is expected by Cellnex to drive considerable demand for macro tower capacity," Credit Suisse analysts say. The high interest has seen deals in the sector rise in recent years with Altice's deal with KKR to form a new French company called SFR TowerCo, one of Europe's largest, a year ago among the latest. "Suffice to say the hope, reflected in the stock price leap, is that the Tower surprise could pull Vodafone's above-industry-average leverage sharply lower," City Index says. Credit Suisse says "ultimately the move could help expose hidden value within the group given infrastructure multiples are well above Vodafone's own multiple". Cellnex outperformance in charts: (Thyagaraju Adinarayan) ***** CORPORATE EARNINGS IMPROVE, BUT CREDIT DETERIORATES (1129 GMT) Earnings growth remains positive in the majority of sectors in Europe, but corporate credit quality is deteriorating, S&P Global Ratings analysts warn in a report on Friday. "Global economic growth is stuttering and has been met with a clear switch in monetary policy direction from the U.S. Federal Reserve and European Central Bank (ECB)," said S&P Global Ratings Senior Director Gareth Williams. Concerns that credit market risk premiums would rise this year in the face of a gradual monetary policy tightening and a barrage of political risks have proved unfounded for now as the balm offered by central banks have helped soothe confidence and underpinned availability of liquidity, the analysts say. Ample and cheap liquidity has also provided a cushion for companies, keeping default rates historically low. But signs of financial excess have crept in in the form of eroded covenants and less stringent documentation. In part reflecting these risks, S&P Global Ratings' global net outlook bias for nonfinancial corporates has turned lower in the second half of 2019. "Systemic fragilities and ebbing corporate credit quality give cause for concern," says senior director Gareth Williams. The sectors with the greatest credit pressure include aerospace and defense, autos, retail and consumer products. Within these segments, many of the challenges are structural - internet disruption, electrification and modest consumption growth in developed economies - rather than harbingers of cyclical problems, the report says. Below are charts showing the deterioration in the credit outlook from S&P: (Josephine Mason) ***** BREXIT BUDGET HOPES BOOST UK HOUSEBUILDERS (1026 GMT) Boris Johnson's move into Number Ten is helping revive the UK's flagging housebuilder sector this morning with the index hitting its highest since early April when the nation was in the midst of a crisis over its Brexit deadline. Britain's new Prime Minister has inherited an economy that could be heading for a slowdown or even a recession, weakening his hand in the battles ahead as the country prepares to leave the European Union. But investors are now betting on him unleashing fiscal stimulus measures to boost spending in the world's No.5 economy ahead of the Oct. 31 Brexit deadline and tax cuts after nearly a decade of austerity. There has been widespread speculation he will cut the stamp duty threshold from 125,000 pounds ($155,512) to £500,000. Adding to the optimism, a junior interior minister flagged an emergency budget in the autumn, as the new PM braces for a potential no-deal Brexit and speculation mounts about a possible national election. "Today's upside for the UK housebuilders comes amid renewed hope for the housing sector, with Boris Johnson's move into number 10 hoping to pave the way for a shake-up in the stamp duty rules," says Josh Mahoney, senior market analyst at IG Group. "Whether (Johnson) actually sticks around for long enough to make an impact on the sector remains to be seen, but with Q1 Stamp Duty receipts down 20% compared with Q4 2018, there is clearly a case for shaking things up in a way that encourages housing mobility rather than stifling it." And investors say Johnson's populist agenda is not yet enough for a wholesale shift to UK assets as uncertainty over Brexit continues to distract and details are too sketchy to return en masse to the much-shunned market. "I'm not sure everyone's entirely convinced what his plan is from here (....) He's still facing the same parliamentary arithmetic as Theresa May did. But the economy does need some support," says Oliver Blackbourn, portfolio manager on the UK-based multi-asset team at Janus Henderson Investors. Jeremy Gatto, investment manager in the cross asset solutions team at Unigestion, agrees: "It's not about what he's going to be doing about the UK economy, but it's all about Brexit." Berkeley shares also getting a boost from Jefferies' upgrade to "buy". (Josephine Mason) ***** OPENING SNAPSHOT: TENTATIVE RECOVERY AS MEDIA STOCKS RALLY (0717 GMT) Investors are shrugging off yesterday's disappointment over the ECB, returning to riskier assets this morning and embracing solid earnings from both sides of the pond this morning. The media sector is leading the pack after Pearson, Vivendi and SES delivered solid results. Gucci-owner Kering is getting punished for delivering a disappointing set of results. The shares are down 8% and set for their worst day since October. Renault and Michelin are also under pressure for results that added to the gloom in the autos sector, which is down 0.5%. With its plan to spin off its European mast business, Vodafone has provided some cheer after cutting its dividend in May. The shares are rallying 7.7% to their highest in more than two months. (Josephine Mason) ***** STOCKS MIXED (0657 GMT) European stock futures are slightly higher this morning, indicating a tentative recovery from yesterday's heavy losses following the ECB's policy statement, although Frankfurt and London are showing some weakness. Solid U.S. numbers overnight from Google-owner Alphabet, Intel and Starbucks are offsetting weaker Amazon numbers for now, although STMicro and Infineon may be under scrutiny after Apple took a major step toward supplying its own smartphone chips by buying the majority of Intel's modem business in a deal valued at $1 billion. FTSE futures are slightly lower amid renewed hard-Brexit worries. Investors are digesting news that Britain will hold an emergency budget in the autumn aimed at shoring up the economy and real estate agent Foxtons Group blamed a drop in H1 revenue on falling London house prices, underscoring Brexit uncertainties. Otherwise luxury goods and the auto sector continue to take the spotlight in earnings. Gucci-owner Kering could fall as much as 8% after reporting a slower-than-expected rise in Q2 sales, hit by a blip in the United States. That could derail the luxury goods sector rally this week. Shares in French carmaker Renault and tyre maker Michelin are expected to fall, the latest to knock confidence in the struggling car and auto parts suppliers sector amid falling demand and tough regulatory conditions. Renault's 2019 revenue cut and Michelin's weaker profits may well be priced in after a punishing week for the industry with warnings piling up (Nissan, Continental, Daimler to name a few). Shares in UK telecom company Vodafone are expected to get a much needed boost as investors welcome news it will spin off mobile mast infrastructure business for a potential listing. After the company slashed its dividend, the news is likely to revive shareholder spirits somewhat. For Bayer, some much-needed good news in its prolonged Roundup trials which is sending shares up nearly 2% in premarket trading - a California judge has slashed a $2 billion award for a couple who blamed the German company's glyphosate-based weed killer for their cancer to just $86.7 million. (Josephine Mason) ***** MORE CARS AND HANDBAGS (0721 GMT) European stock futures are higher in early deals, as investors shake off the disappointment and losses following the ECB's policy meeting yesterday. The Eurostoxx 50 are up 0.1%, and Paris futures are up 0.2%, showing some resilience to pressure overnight in Asia. Even after yesterday's battering, the euro-zone benchmark is set for a decent 1.2% weekly rise ahead of the much-anticipated Fed meeting next week, while the pan European STOXX 600 under performed, dragged down by the FTSE. Some solid U.S. numbers overnight from Google-owner Alphabet, Intel and Starbucks appear to be offsetting the weaker Amazon numbers released in after hours, although U.S. chipmaker Xilinx Inc tumbled giving a weak quarterly forecast, hit by the impact of U.S. restrictions on selling to Huawei. On this side of the pond, earnings from the car and luxury goods sectors continue. French carmaker Renault and tyre maker Michelin are the latest to dampen the already-flagging spirits in the car and auto parts suppliers sector amid falling demand and tough regulatory conditions. News that Renault cut its 2019 revenue outlook and Michelin saw its profits suffer from shrinking vehicle output may well be priced in after torrid numbers for Nissan, Continental, Daimler ... the list goes on. Gucci-owner Kering posted a slower-than-expected rise in Q2 sales, hit by a blip in the United States. That could take some of the shine off the luxury goods rally this week. French supermarket retailer Carrefour reported higher first-half profits and said it was on track with a strategic overhaul aimed at boosting earnings and tackling competition from the likes of Amazon. For Bayer, some much-needed good news in its prolonged Roundup trials - a California judge has slashed a $2 billion award for a couple who blamed the German company's glyphosate-based weed killer for their cancer to just $86.7 million. Anglo American shares suffered their worst day in three months yesterday after results, but investors must now digest news that Indian billionaire Anil Agarwal, the biggest shareholder in the mining company, will divest the nearly 20% stake he has held since 2017. Agarwal said targeted returns had been achieved "even sooner than expected" and Anglo American's share price had nearly doubled since he began his investment. Here are some early headlines: French carmaker Renault cuts 2019 revenue outlook Nestle posts H1 organic growth of 3.6% In Roundup case, U.S. judge cuts $2 bln verdict against Bayer to $86 mln Sabadell books Q2 profit of 273 mln euros after loss last year due to TSB costs Faltering U.S. sales take shine off Kering's star Gucci brand Light maker Signify's Q2 core profit improves on cost savings Italy's Armani sees first signs of recovery after 2018 sales fall Retailer Carrefour says strategic overhaul on track as H1 profits rise Mothercare in talks to sell or franchise its UK store operations - Sky News Vivendi's Universal reports stellar results ahead of possible partial sale Spain's Caixabank Q2 net profit falls 85% due to restructuring costs Construction materials group St Gobain's H1 profits rise Michelin margins hit by auto slump despite price hikes (Josephine Mason) ***** AFTER ECB ROLLERCOASTER, STOCKS TAKING A BREATHER (0518 GMT) After the wild ride yesterday that saw euro zone stocks soar to one-year highs only to hand back all the gains as early excitement over ECB's dovish policy statement turned to disappointment, equity markets may take a bit of a breather ahead of the weekend. IG financial spreadbetters expect London's FTSE to open 4 points higher at 7,493, Frankfurt's DAX to open 36 points up at 12,398, and Paris' CAC to open 6 points higher at 5,584. There are plenty of earnings on the slate for investors to digest - last night, Gucci-owner Kering posted a slower-than-expected rise in Q2 sales, hit by a blip in the United States. That could take some of the shine off the luxury goods rally this week. Investors will also be eyeing U.S. Q2 GDP for justification for the Fed to pull the trigger on lower interest rates next week. "The probability of a 50-basis-point cut stands at a relatively low 17.5% level. But this could change fast," says Ipek Ozkardeskaya, senior market analyst at London Capital. Consensus in Reuters polling is for growth of 1.8%, vs 3.1% in Q1. The data "could well introduce further doubt into market expectations of what sort of messaging that we might get from the Federal Reserve next week," says Michael Hewson, chief market analyst at CMC Markets UK. "Any number above 2% would inevitably raises questions as to why it’s even necessary to consider a rate cut, but given weaknesses elsewhere in the global economy, it would still be a big surprise were the Fed not to go next week." (Josephine Mason) ***** ($1 = 0.8038 pounds) ($1 = 0.8986 euros) (Reporting by Danilo Masoni, Josephine Mason and Thyagaraju Adinarayan)