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LIVE MARKETS-Trade war "killed my performance"

* STOXX 600 down 0.6% * Fresh Italian political tumult drags stocks lower; FTMIB down 2.4% * Bayer jumps on report of Roundup case settlement * UK GDP contracts unexpectedly 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 TRADE WAR "KILLED MY PERFORMANCE" (1024 GMT) A whopping $12.4 billion left equities on Monday, according to BAML's latest fund flow data, as markets started the week with U.S.-China trade tensions scaling new peaks after Trump slapped another set of tariffs on Chinese imports. The Black Monday (Aug. 5, not the several others we've seen) saw the 12th largest single-day equities outflows, and oh boy, the more staggering number is the $3.5 trillion value wiped off global equities in a span of just three days. BAML's Michael Hartnett points to three pieces of top client feedback: #1 AMERICA FIRST: ..."why bother investing outside of the US...no growth, no yield" #2 CYCLICALS LAST: "trade war/recession risk too high, and they can (and have) killed my performance" #3 JAPANIFICATION FOREVER: "zero rates in Japan & Europe don't work, so why should they in US, and how can we hedge quantitative failure?" For the week to Aug. 7, equities saw the biggest outflows ($25 billion) since the December 2018 sell-off. (Thyagaraju Adinarayan) ***** ANOTHER MONTH, ANOTHER POLITICAL CRISIS (0932 GMT) "Seeing as it's only been a couple of months, it's about time we had some fresh political turmoil in Italy," quips Neil Wilson, chief market analyst at Markets.com in his morning note. Cue leader of Italy's ruling League party and deputy PM Matteo Salvini pulling the plug on the governing coalition last night and calling for fresh elections in the hope that his party would win an outright victory over anti-establishment 5-Star Movement. The fresh political upheaval in the euro zone's third largest economy is pummelling Italian stocks and government bonds, sending the blue chip index to June 7 lows and the banking index to its weakest since October 2016. Government 10-year bond yields are set for their biggest one day rise since May last year. The budget crisis and prospect of ultra low rates for longer have already damaged bank stocks' valuations over the past couple of years. (see the chart below) But more uncertainty and another looming battle over the budget with Brussels have shaken investor confidence anew. Wilson says a purely Salvini-led government would likely be more at odds with Brussels over the budget deficit, raising fresh risks for the euro-zone economy. ActivTrades chief analyst Carlo Alberto de Casa agress: "The new budget is due soon and another battle with EU seems likely." The tumult also raises the chance the ECB may opt for a bigger rate cut next month and beyond. The market is pricing in at least two cuts by the year-end. For a rundown of what's next for Italy, check out: SCENARIOS-Italy's ruling coalition breaks down. What comes next? In the meantime, brace for a wild autumn. An Italian general election could take place sometime in October ..... just as the UK is due to leave the European Union. (Josephine Mason) ***** OPENING SNAPSHOT: IT'S ALL ABOUT ITALY (0733 GMT) Prospects of an early election and renewed political tumult in Italy are roiling the country's banks as fresh political uncertainty sets in. The Italian banking index is down 4.2% at its lowest since October 2016 and that's casting a pall across euro-zone banks (-2%). The pan-European STOXX 600 index is down 0.2% with WPP and G4S rising 6% after their better-than-expected results. G4S also confirmed plans to separate its cash solutions business. After banks, miners are the top sectoral fallers, weighed down by weak iron ore prices. China's iron ore futures were on course for their biggest weekly drop since March 2018. Among risers, the STOXX media index is the top performer, mainly driven by WPP. (Thyagaraju Adinarayan) ***** EUROPE HEADING FOR WEAK OPEN; ITALY, CHIPMAKERS IN FOCUS (0656 GMT) European stock futures point to a weak open with France seen sharply lower after yesterday's outperformance as rising political tensions in Italy and Huawei headlines overnight bring back turbulence in stock markets. A Bloomberg report overnight that Washington will hold off on a decision about licensing U.S. companies to restart business with Huawei could hit chipmakers and trade-sensitive sectors. Dealers see Italian banks opening 2% lower after Matteo Salvini called for early elections. Also worth keeping an eye for is UK GDP numbers, which are due at 0830 GMT. In companies, Novo Nordisk is seen rising 2-3% as the Danish pharma company lifted its 2019 sales outlook after estimate-beating second-quarter results. In the UK, Hikma is seen up 1% after it raised its sales outlook for the generic drug business and AstraZeneca shares are expected to rise 1% after its trial showed its Tagrisso drug helps lung cancer patients live longer. G4S shares could get a lift after its board approved plans to separate its cash solutions business. The British security contractor says it received unsolicited expressions of interest from third parties. WPP's better-than-expected organic sales performance in the second quarter is seen driving the world's biggest advertising company's shares 2-3% higher. In further evidence of the service-based economy doing much better than industrials, German IT systems provider Bechtle beat Q2 expectations with shares seen rising 5% pre-market. Meanwhile, car parts maker Hella reported fourth-quarter results in-line with pre-released numbers but Jefferies analyst points to weak auto margins. Key headlines: Drugmaker Novo Nordisk lifts sales outlook on new diabetes, obesity treatments Innogy loses more customers in Britain Chairman of Italy's UniCredit Fabrizio Saccomanni dies suddenly at 76 Airbus Says Wins 246 Gross Aircraft Orders In Jan-July WPP posts better than expected second quarter performance Security firm G4S to separate cash solutions business BAE finance chief to step down next year, taps Greve to take over William Hill profit hit by regulatory cap, U.S. expansion costs AstraZeneca Tagrisso helps lung cancer patients live longer -study (Thyagaraju Adinarayan) ***** UNEASY EASE IN EUROPE (0542 GMT) After yesterday's exuberance which saw the pan European STOXX 600 stage one of its biggest daily gains this year and without any immediate sign that the tit-for-tat spat between Beijing and Washington isn't escalating (for now), European stock markets are expected to hit pause again. How long that lasts is not clear as attention turns from the other side of the pond to Italy after the leader of Italy's ruling League party, deputy prime Minister Matteo Salvini, declared the governing coalition unworkable late last night after months of internal bickering and said the only way forward was to hold fresh elections. Investors are also still cautious after the tumultuous week since U.S. President Trump announced plans for further tariffs on Chinese goods and Beijing retaliated by devaluing the yuan and the benchmark is set for its second weekly drop. Also weighing on risk appetite is a report that Washington is delaying a decision about licenses for U.S. firms to restart trade with Huawei Technologies . Still for now markets appear to have stabilised overnight. IG financial spreadbetters expect London's FTSE to open 20 points lower at 7,266, Frankfurt's DAX to open 44 points lower at 11,801, and Paris' CAC to open 26 points lower at 5,362. (Josephine Mason) ***** (Reporting by Danilo Masoni, Josephine Mason and Thyagaraju Adinarayan)