LIVE MARKETS-Trade war = Fed hikes

March 5 (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

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Trade war = Fed hikes (0946 GMT)

That's the point Paul Krugman makes in his NYT column. With (Other OTC: WWTH - news) the U.S. being close to full

employment, the country can't just painlessly make up for the imports deterred by new tariffs,

and a spike in inflation is to be expected.

"What would happen instead is that the Fed would raise rates sharply to head off

inflationary pressures (especially because a 20 percent tariff would directly raise prices by

something like 3 percent)," the Nobel prize economist writes.

Two big side effects would be expected from this: stress on leveraged sectors and a rising

dollar.

Here's a link to his column: http://bit.ly/1HKJJ8M

(Julien Ponthus)

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OPENING SNAPSHOT: ITALIAN STOCKS HIT 6-MONTH LOW (0812 GMT)

Italian shares are this morning's big losers, against a broadly positive European backdrop.

Italy's benchmark index has hit a six-month low after weekend elections boosted the influence of

anti-establishment parties and further clouded prospects for structural reform.

Irish stocks are down, with the benchmark index falling 2.4 percent, after a string

of negative economic data.

Elsewhere European autos are feeling the pressure from Trump's proposed tariffs,

while a fall in Axa (Paris: FR0000120628 - news) 's shares is weighing on insurers after the company announced a $15

billion acquisition of reinsurer XL.

More broadly, gains for energy stocks and tech are buoying the market.

Here's your opening snapshot:

(Kit Rees)

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COMPANY NEWS HEADLINES: MORNING ROUND-UP (0741 GMT)

Insurer AXA agrees to buy XL Group (NYSE: XL - news) for around $15 bln

Siemens Healthineers' IPO smaller than expected

Amazon has French grocery market in its sights, French boss tells paper

BASF in talks to buy Bayer (IOB: 0P6S.IL - news) 's vegetable seeds business - sources

VW to pursue IPO plan for trucks division -Handelsblatt

Trump threatens to tax European auto imports

Airbus plans to move or cut 3,600 jobs - magazine

British energy regulator to limit back billing to 12 months

UK PM May calls on housebuilders to "do their duty", demanding more homes

Akzo Nobel (Amsterdam: AKZA.AS - news) nominates former Maersk CEO Andersen as chairman

Ryanair and Aer Lingus sign flight-connection deal -Sunday Times

Swiss bank Raiffeisen CEO says will not quit over predecessor probe

Car (HKSE: 0699-OL.HK - news) service Addison Lee sees profit ahead as expansion continues

Dialog expects to supply chips to Apple (NasdaqGS: AAPL - news) through 2020 - CEO in paper

Tesco (Frankfurt: 852647 - news) completes $5.5 bln takeover of Booker​

BRIEF-Trinity Mirror Says FY Revenue Fell 12.6 Pct T

MEDIA-Iberdrola (Amsterdam: ID6.AS - news) puts five engineering companies on sale - El Confidencial

BRIEF-Spectris Says Commencing Share Buyback

(Tom Pfeiffer)

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STOCK FUTURES TURN NEGATIVE (0728 GMT)

It looks like sentiment has taken a bit of a knock in Europe as stock futures fall into

negative territory. A combination of concerns over trade wars as well as a rise in support for

anti-establishment and far-right groups in Italy are likely to weigh on European share trading

this morning.

Here's your snapshot:

(Kit Rees)

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ITALY? "WE EXPECT INCREASED VOLATILITY" (0649 GMT)

Europe may open slightly up today as it recovers from a bad week but the Italian vote will

likely keep the Milan bourse under pressure with IG (Frankfurt: A0EARV - news) analyst Vincenzo Longo calling the FTSE MIB

index down more than 1 percent at the open today.

The vote is set to result in a hung Parliament with very uncertain government prospects, as

anti establishment parties M5S and Lega delivered a stronger than expected results.

Chief Investment Officer UBS WM Italy Matteo Ramenghi believes an alliance between M5S and

Lega looked unlikely, although warns of a volatile period ahead for Italian assets.

"We expect lengthy negotiations after these elections, which may lead to increased

volatility of Italian assets," he says.

"A broad grand coalition would be well received by markets as it could result in political

stability and fiscal discipline. Repeat elections could prolong uncertainty and weigh on Italian

assets. The Italian equity market has not priced in electoral uncertainty, but current yields on

government bonds suggest they have incorporate some political risk," he adds.

"An anti-establishment alliance of M5S and Lega, the worst case scenario for markets, looks

unlikely due to different programs," he also says.

(Danilo Masoni)

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Morning call: Europe set to recover despite Italy uncertainty (0624 GMT)

Good morning. European shares are expected to open higher today, as markets recover from a

sell-off last week when investors were spooked by worries over a global trade war.

Italian voters delivered a hung parliament on Sunday, flocking to anti-establishment and

far-right parties in record numbers and casting the euro zone's third-largest economy into a

political gridlock that could take months to clear.

That put the euro in choppy waters in Asian trading. The single currency however found

support after Germany's Social Democrat party decisively backed the renewal of an alliance with

Chancellor Angela Merkel's conservatives, allowing her to form a new government more than five

months since the country's inconclusive election.

Here your morning calls, courtesy of CMC (BSE: CMC.BO - news) .

FTSE100 is expected to open 33 points higher at 7,103

DAX is expected to open 37 points higher at 11,950

CAC40 is expected to open 16 points higher at 5,152

(Danilo Masoni)

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