LIVE MARKETS-Trade war watch: capital goods to feel the heat

* European stocks fall

* STOXX set for small weekly gain

* Results hit Beazley (LSE: BEZ.L - news) , Stora Enso (LSE: 0CX9.L - news)

* U.S. futures lower

LONDON, July 20 (Reuters) - Welcome to the home for real-time coverage of European equity

markets brought to you by Reuters stocks reporters and anchored today by Helen Reid. Reach her

on Messenger to share your thoughts on market moves: helen.reid.thomsonreuters.com@reuters.net

TRADE WAR WATCH: CAPITAL GOODS TO FEEL THE HEAT (1125 GMT)

Capital (Other OTC: CGHC - news) goods firms, which provide machinery and parts to bigger industrials, are seen as

some of the most vulnerable to rising tariffs which could crimp trade flows and deprive them of

the demand for goods they need to grow. DB analysts tease out which stocks are the most

sensitive, and what to watch as earnings start coming in.

"We have seen some relief lately but doubt that it's over yet," they warn. "We don't think

there will be any tangible effect from the trade war in Q2 results yet, but we still cut our

estimates and target prices ahead of results, reflecting the heightened uncertainty,

particularly regarding margin estimates."

They say they'll watch Q2 orders, margins and inventory levels closely.

Analysing which cap goods shares have been most impacted by newsflow around protectionism,

DB finds the worst-hit have been Kion, Jungheinrich (IOB: 0EXP.IL - news) and GEA while

Vossloh (IOB: 0N2Z.IL - news) , Rational (IOB: 0FRJ.IL - news) and Krones (IOB: 0LQ4.IL - news) have outperformed.

Morgan Stanley (Xetra: 885836 - news) analysts don't think it's worth even trying to pick out winners and losers in

the sector as "the consequences are generally not favourable", but they flag gas turbines,

transformers, motors and lighting as explicitly at risk from supply chain disruption.

I/B/E/S estimates show no hit to estimates for cap goods earnings so far:

(Helen Reid)

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EUROPEAN EQUITIES SUFFER FURTHER OUTFLOWS (1056 GMT)

It's the 19th straight week of outflows from European equities, EPFR figures cited by BAML

show. That means investors have been pulling money from the region for around 4 1/2 months

straight, as last year's "Euroboom" trade unravels.

Looks like the recent weakening in the euro hasn't helped draw investors back into the

exporter-heavy region. Below you can see the lag in European earnings relative to world earnings

is increasing, as the U.S. gets the tax reform sugar rush.

Globally, in terms of sector flows this week has seen an interesting mix of cyclicals and

defensives with inflows to financials, tech, consumer, healthcare and materials, while real

estate, utilities and energy suffered outflows.

BAML strategists also note global equities' lacklustre performance this year, save one

sector: "The exception is invincible US tech stocks, which trade as though interest rates will

never go up," they write. "Until investors fear the Fed there is little fear of FAANG stocks."

(Helen Reid)

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BEEP BEEP... INVESTORS HANG UP ON TELECOMS (1051 GMT)

By a whisker European telecoms avoided a fresh three-year low this morning.

But why is the sector so unloved even at time when investors are repositioning towards

defensive stocks, seeking insulation from protectionism?

Recent newsflow has reinforced the idea that competition is still a big risk with operators

in countries like Italy and Belgium threatened by a fourth mobile phone player. And earnings

expectations have been on a long run of downgrades.

Credit Suisse (IOB: 0QP5.IL - news) analysts say the upcoming earnings season will be particularly important for

this sector, but see a ray of hope.

"With (Other OTC: WWTH - news) euro area macro surprises bouncing currently and the euro stable, there seems scope

for investors to re-engage with the more domestic end of the European equity market, of which

telcos are a part," they say in a note.

(Danilo Masoni)

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OPENING SNAPSHOT: EUROPEAN STOCKS PULL LOWER (0716 GMT)

European stocks are evidently feeling the ripples from trade tensions as shares in autos,

basic resources and banks are the biggest sectoral fallers.

Earnings are also shaking things up. Shares (Berlin: DI6.BE - news) in paper maker Stora Enso are among the biggest

fallers, down more than 11 percent, after the company's Q2 profit came in below market

expectations, while insurer Beazley is also another big faller after its first-half profit took

a hit from rising U.S. interest rates.

Here's your opening snapshot:

(Kit Rees)

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WHAT'S ON THE RADAR FOR THE OPEN (0644 GMT)

Currency falls and trade war pressures sent Wall Street and Asian shares down overnight and

Europe was also set to fall on Friday, with futures down around 0.2 percent.

Despite the simmering tensions, pan-European stocks and Germany’s DAX – which is highly

exposed to trade and China - were set for a third straight week of gains as earnings streamed

in, taking the focus away from trade tensions.

Car (HKSE: 0699-OL.HK - news) parts maker Faurecia (Swiss: EO.SW - news) and aerospace & defence firm Thales (LSE: 0IW5.L - news) are both seen rising around 3

percent after stronger profits, while price pressures on spirits maker Remy Cointreau (Swiss: RCO.SW - news) are likely

to rein back its gains after results, with shares indicated up 1 percent.

Food processing firm Koninklijke Wessanen is seen falling 4 to 10 percent, after its

like-for-like growth disappointed.

And trade tariff effects were one factor cited by Belgian steel wire maker Bekaert (EUREX: 11962877.EX - news) for its

big profit warning. It now expects first-half profit to be 20 percent below analysts’ estimates

– and is likely to see a sharp share price drop as a result.

Another profit warning from Norwegian sports retailer XXL (LSE: 0R3P.L - news) , indicated down 10 percent at the

open.

(Helen Reid)

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FUTURES DOWN AS TRADE CLOUDS RETURN (0611 GMT)

Futures are pointing to modest losses across European benchmarks today after a slide in Wall

Street and Asian stocks as trade worries dent the yuan and Trump talks down the dollar.

Germany's DAX, which has become somewhat of a European bellwether for trade tensions, should

hold on to its third straight week of gains however - it's currently up 1.2 percent on the week.

Apart from earnings streaming in, another event on the radar is EU chief negotiator Michel (Euronext: MLRAM.NX - news)

Barnier's presentation after he meets the European Affairs Ministers Council to discuss the

latest developments in fraught negotiations.

"We expect the discussion will likely focus on the White Paper published by the UK

government last week, potentially offering the first official EU response to the UK proposals,"

write Societe Generale (Swiss: 519928.SW - news) analysts.

(Helen Reid)

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EARLY MORNING HEADLINE ROUND-UP (0549 GMT)

Earnings will drive the day again today with car parts maker Faurecia, aerospace and defence

firm Thales and spirits group Remy Cointreau among notable results. And the U.S. Department of

Commerce hearing on car tariffs yesterday saw the auto industry rally together to blast the levy

plans.

French group Thales posts higher H1 profits, says Gemalto (LSE: 0OGA.L - news) deal on track

Car parts maker Faurecia posts higher H1 profit, raises outlook

Remy Cointreau's Q1 sales growth curbed by impact of price increases

Sweden's Telia buys Bonnier's TV unit in SEK 9.2 billion deal

Britain says Huawei "shortcomings" expose new telecom networks risks

Fiat Chrysler kicks off Magneti Marelli spin-off

Roche gets breakthrough status for Alzheimer's test Elecsys

Ill-prepared suppliers threaten aerospace giants in case of hard Brexit

Volkswagen (IOB: 0P6N.IL - news) to furlough 1,000 workers in Brazil as sales slow -union

EU, Mexico automakers blast Trump auto tariff plan

(Helen Reid)

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MORNING CALL: EUROPE TO FALL IN STEP WITH WALL ST, ASIA DECLINE (0535 GMT)

The week is set to end on a more pessimistic note for European stocks with benchmarks likely

to follow in the footsteps of falls on Wall Street and in Asian shares.

Trump's comments criticising the Fed's decision to hike rates and expressing concern about a

strong dollar shook the greenback from a one-year peak, while a slide in the Chinese yuan

unnerved investors in Asian stock markets and stoked concerns Beijing's currency management

could become the next flash point in a fierce trade dispute with the United States.

Spreadbetters CMC Markets expect the FTSE 100 to open 8 points lower at 7,676, the DAX is

expected to open 30 points lower at 12,656, and the CAC40 is seen opening 13 points lower at

5,404.

The STOXX is currently set for its third straight week of gains, though losses today might

erase that.

(Helen Reid)

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