LIVE MARKETS-U.S. jobs data spoils this week's stock market party

* STOXX falls 0.7% * Strong U.S. jobs data sends U.S. futures lower * German industrial orders drop sharply * Industrials stocks fall 1.9% * Hexagon tumbles 12% after warning about China slowdown July 5 - 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 U.S. JOBS DATA SPOILS THIS WEEK'S STOCK MARKET PARTY (1327 GMT) A sharp rebound in U.S. jobs growth in June has pushed European stocks and U.S. futures further lower as investors grow nervous this will lead to Fed delaying rate cuts. The pan-European STOXX 600 has just hit day lows, sliding 0.7%, while banking stocks turned positive. The move pretty has brought an end to a six-day winning streak in European stocks. Analysts and traders still believe in a July rate cut of 25 bps, but it looks like hopes of a 50 bps cut are off the table for now. "These are good numbers, but a rate cut in July is still all but inevitable," says Luke Bartholomew, investment strategist at Aberdeen Standard Investments. "The Fed never makes a decision off of one economic data point and the narrative remains inflation is subdued, and global growth concerns are heightened," Edward Moya, analyst at OANDA, says. (Thyagaraju Adinarayan) ***** STORM BREWING IN INDUSTRIALS STOCKS (1123 GMT) A big disappointment in German industrial orders for May is roiling European industrial stocks this morning -- the STOXX industrial goods index is sliding 1.7%, coming off a strong rally (+20%) so far this year. Ahead of the Q2 earnings season, Deutsche Bank analysts warn of widespread risks: "We expect sector growth to get worse before it gets better and the tone of management during Q2 calls to be more pessimistic than optimistic". Deutsche Bank and Bank of America Merrill Lynch analysts have both turned bearish on the world's largest industrial bearings maker SKF. BAML downgraded the stock to "underperform" citing "continued weakness in automotive end markets and soft industrial demand". Deutsche Bank also downgraded its earnings estimates for ABB, Siemens Gamesa and Alstom. With the EU capital goods sector trading at a premium to the wider indices (see below), any small disappointment in earnings is likely to lead to a sharp fall in stock prices. (Thyagaraju Adinarayan) ***** EUROPEAN BANKS: DIM OUTLOOK FOR Q2 RESULTS (0954 GMT) Bank stocks have had a lot to contend with lately, amid a remarkable U-turn in central bank policy, and their shares reflect this: the euro zone banks sector's been on a roller-coaster ride, as you can see below. It was outperforming the main market at the start of Q2 but is now lagging badly - as investors digest a lower-for-longer interest rate environment. Second-quarter results aren't likely to improve things much for the sector, according to UBS. "We expect consensus EPS forecasts for the banks to fall ahead of Q2 results and concerns around capital adequacy to return to the fore," analysts at the Swiss bank write. "Views on rates can change quickly but the outlook for bank revenues has clearly taken a turn for the worse." Remember when bank stocks got quite excited about the prospect of ECB deposit tiering? Well, UBS' Jason Napier and team reckon tiering would be "cold comfort" relative to pressures on interest income. "The sector looks cheap at a 13-14% implied cost of equity but buying ahead of EPS cuts is risky," they conclude. Their top picks are Bawag, Danske, BNP, ING, Lloyds, and Unicredit, and their least preferred are Svenska Handelsbanken, HSBC, and AIB. (Helen Reid) ***** OPENING SNAPSHOT: DISMAL GERMAN DATA DERAILS RALLY (0745 GMT) Earlier this morning, the markets appeared to be struggling for direction after quiet Asian trading and the U.S. out for the July 4 holiday. But dismal German industrial orders data have provided a trigger for investors to lock in some of the profits notched up this week when the mood brightened amid expectations of dovish monetary policy and progress in the U.S.-China trade talks, pushing equities to their highest levels in more than a year. The STOXX 600 is still on track for its 5th straight week of gains. Investors are also staying on the sidelines ahead of crucial U.S. jobs data later in the day. Europe's industrial index is one of the biggest fallers in early deals, with Schneider Electric, Siemens and Sandvik leading the charge lower and a warning about a slowdown in China from Swedish industrial technology group Hexagon, down 13%, is adding to the poor sentiment. Miners and housebuilders are dragging the FTSE 100 lower - midcap building materials supplier SIG fell almost 10% after reporting a drop in H1 sales while weak metals prices weighed on Rio Tinto and Anglo American. (Josephine Mason) ***** WHAT'S ON OUR RADER: CHIPS, AIRLINES AND AVIATION (0657 GMT) With the U.S. markets closed overnight and subdued trading overnight in Asia, European stock markets are pretty becalmed as investors sit on their hands ahead of the U.S. jobs data, which will help make or break the case for a rate cut later this month. London stock futures are slightly lower as weak metal and crude prices weigh on its mining and oil heavyweights, but otherwise stock futures are all flat. German futures reversed early gains after weaker-than-expected industrial orders data. Still, it's been another solid week for European equities – the euro-zone index ended yesterday at one-year highs and is on track for a fifth straight week of gains amid optimism that Christine Lagarde, the nominee to replace Mario Draghi as ECB chief, will maintain the central bank's dovish stance and as Washington and Beijing prepare to resume trade talks. Samsung Electronics' warning that profits will plunge for a third straight quarter as the U.S.-China trade war wreaks havoc on global chip and smartphone markets will likely pressure semiconductor stocks. It also serves as a reminder that the H2 recovery remains elusive and an official truce between the world's top two economies is still a long way off even as they prepare to resume talks next week. British Airways owner IAG has said it's no longer interested in Norwegian Air, although a media report that it may be in the running could give a lift to the struggling Norwegian airline stocks, dealers say. Its shares have lost 70% of their value over the past 12 months. Shares in UK small-cap aviation services company John Menzies are seen sinking by as much as a quarter after its profit warning as the aviation market and cargo volumes remain weak, underscoring worries about slowing global trade. (Josephine Mason) ***** BECALMED (0633 GMT) Frankfurt stock futures are ekeing out small gains this morning even after weaker-than-expected industrial orders data for May, which were just released, and London futures are slightly lower due to weaker iron ore prices in China and softer crude prices. Otherwise the rest of the market appears becalmed as investors sit on their hands ahead of the U.S. nonfarm payrolls data later, which will help make or break the case for a rate cut later this month. Economists polled by Reuters are predicting a rise of 160,000 in June from 75,000 in May although a weak ADP reading earlier this week stirred some expectations it may fall short of that level. (Josephine Mason) CHIPS AHOY (0557 GMT) The standout corporate news this morning is from IAG and Samsung Electronics. Samsung has warned of a steep plunge in Q2 operating profit, its third consecutive quarter of declines, as the U.S.-China trade war wreaks havoc in global chip and smartphone markets. That news is likely to pour some cold water over the European semiconductor makers at the open, reinforcing worries that the H2 recovery remains elusive as an official truce in the U.S.-China trade spat remains far off, traders say. British Airways owner IAG is looking at making a bid for Norwegian Air, according to a news report. Other headlines this morning: Deutsche Bank plans separate "corporate bank" unit as part of overhaul - report Aroundtown: Acquisition Of 900 Mln Eur Properties In Germany And Benelux UK retailers suffer "washout" in June - survey EXCLUSIVE-France's Mersen investigated by India's antitrust body -sources Vivendi's pay-TV Canal Plus to cut 500 jobs in France - Les Jours Rio Tinto's Icelandic aluminium plant attracts Glencore - sources ArcelorMittal removes 30 families from area close to dam in Brazil EU opens road to 5G connected cars in boost to BMW, Qualcomm French official says "not aware" of new discussions on Renault, Fiat Chrysler IAG prepares offer for Norwegian Air - Spain's OKdiario (Josephine Mason) ***** LOOKING FOR DIRECTION (0522 GMT) With the U.S. markets closed overnight, Asian trading's been a little subdued and Europe is also expected to be pretty muted this morning, with all eyes on U.S. nonfarm payrolls later. Wall Street closed at record highs before the July 4 holiday. Still, the pan European STOXX 600 ended yesterday at its highest level since May last year and is on track for a fifth straight week of gains amid optimism that Christine Lagarde, the nominee to replace Mario Draghi as ECB chief, will maintain the central bank's dovish stance and as Washington and Beijing prepare to resume trade talks. Expectations in the bond market are set for an interest rate cut in the United States this month, although some investors are starting to question whether the U.S. market has gotten ahead of itself given data from the world's largest economy is holding up ok. "Today's US payrolls report has the potential to upset the apple cart when it comes to whether or not we can expect to see a Fed rate cut later this month, and if we do whether it will be 25 or 50 basis points," says Michael Hewson, chief market analyst at CMC Markets UK. "Currently market pricing is at a 100% certainty that we will get some form of move from the FOMC when they meet at the end of this month, despite data that while by and large is a little softer, isn't screaming economic slowdown." ***** (Josephine Mason) (Reporting by Danilo Masoni, Helen Reid, Josephine Mason and Thyagaraju Adinarayan)