LIVE MARKETS-Will Uber be blamed for the Fed's next policy mistake?

* European stocks rally as report suggests China-U.S. trade detente

* Autos, tech, industrials jump

* Global stocks set for 4th straight week of gains

* Telecom Italia (Amsterdam: TI6.AS - news) drops 7 pct after profit warning

* Mnuchin discussed lifting some or all tariffs on Chinese imports - WSJ

Jan 18 - Welcome to the home for real-time coverage of European equity markets brought to

you by Reuters stocks reporters and anchored today by Julien Ponthus. Reach him on Messenger to

share your thoughts on market moves: julien.ponthus.thomsonreuters.com@reuters.net

WILL UBER BE BLAMED FOR THE FED'S NEXT POLICY MISTAKE? (1504 GMT)

There's no shortage of economists pulling their hair in despair at the Phillips curve which

seems to have lost its mojo when it comes to predicting the relationship between unemployment

and inflation.

How, with a jobless rate at near 50-year lows and after years of aggressive QE, is U.S.

inflation just barely above 2 percent, is anyone's guess.

Vincent Deluard, a strategist at INTL FCStone (Frankfurt: I4F.F - news) believes the rise of the likes of Uber or

GrubHub (Frankfurt: A1XE9Z - news) could very well have been game changers by structurally erasing friction in the job

market.

"The first effect of the gig economy was to contribute to a deflationary expansion: thanks

to a more flexible labor market, the unemployment rate fell below levels that would have been

inflationary in prior cycles, and the expansion lasted longer," Deluard believes.

But perhaps more importantly, the gig economy may also have drastically changed how

inflation behaves during recessions, adding to the risk that the Fed will get it wrong and make

a policy mistake.

"Over the longer-term, the rise of the gig economy could have inflationary effects because

it increases the bargaining power of labor," Deluard says.

Hence a potential nightmare for policymakers if the next recession turns out to be

inflationary!

Here's a link to Deluard's research note: https://bit.ly/2FywZZr

(Julien Ponthus)

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A SURPRISE CONTENDER FOR NEW ENGINE OF THE WORLD ECONOMY (1315 GMT)

Continued inflows to emerging market equities (the 14th straight week of inflows, according

to EPFR data) indicate investors are slowly growing more optimistic about an asset class that

was one of the worst hit by last year's global selloff.

And with reason, Goldman Sachs (NYSE: GS-PB - news) says: since September, most of the total upward impulse to

global activity, measured by their proprietary "current activity indicator", has come from

emerging markets excluding China (as you can see below).

In other words, in a twist of events, EM has been the engine of world growth for the past

months.

"Consistent with the idea that there is significant slack in many large emerging economies

that should support a moderate growth rebound in 2019, levels of activity have ticked up by a

significant 100 basis points in EM ex. China," writes Goldman analyst Ian Tomb.

Just this morning, Fidelity International's multi-asset fund has moved to overweight on

emerging-market equities because valuations are attractive.

But the emerging engine, itself very dependent on China and developed economies, can't keep

chugging along by itself.

"A key risk is that EM ex. China ... may not be able to 'accelerate alone' for much longer,"

says Tomb.

"While our Dollar and EM views have benefited from both a dovish Fed and better ‘trade war’

headlines in recent weeks ... continued activity disappointments in the Euro area and China are

a key source of concern," he adds.

Goldman Sachs expects the dollar to weaken this year and is positive on emerging markets.

(Helen Reid)

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NOT YET GOOD OLD MELT-UP DAYS BUT STILL! (1129 GMT)

World stocks are set for a fourth straight week of gains, an achievement not

seen since July.

We're clearly not back at the stage when TEN winning weeks between the end of November 2017

and January 2018 got investors worried about a melt-up and that the surge in stock markets was

so overwhelming that it could only end in tears.

Still, things are looking up it seems.

"Sentiment is clearly improving and the bulls are gathering momentum as previous headwinds

slowly morph into tailwinds for the markets," comments Oanda analyst Craig Erlam.

Fidelity's multi-asset fund has also shifted to overweight equities and fixed income, and

underweight cash, it announced earlier.

(Julien Ponthus)

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OPENING SNAPSHOT: EUROPE RALLIES TO 6-WEEK HIGHS (0844 GMT)

European shares are rallying into the weekend amid renewed optimism over Washington's

festering trade spat with Beijing, with pan European STOXX 600 hitting its highest since Dec (Shanghai: 600875.SS - news) . 5

and on pace for its third straight weekly gain. Trade-sensitive mining, oil & gas, autos and

banking stocks are leading the gains.

The main bourses are up between 0.9 and 1 percent in early deals.

Among the individual moves, a profit warning from Ryanair is punishing low-cost airline

stocks, with UK rival easyJet down 2.3 pct and Telecom Italia has plunged 8 percent to the

bottom of Milan's main bourse and the STOXX 600 after its forecast that FY organic EBITDA will

drop slightly.

Casino provided some cheer to the battered retail sector, standing by its guidance despite

the damage from the protests that has swept France over the past few months.

ON THE RADAR AT THE OPEN: M&A, EARNINGS AND SO MUCH MORE THAN TRADE (0743 GMT)

Trade war optimism is expected to lift European stock markets this morning after having

boosted shares on Wall Street and Asia.

Futures on both sides of the Atlantic (Shanghai: 600558.SS - news) are up, even if the rises are not in the “irrational

exuberance” league: up 0.6 pct at the most for the IBEX.

Not much macro but UK retail data at 0930 GMT will be closely watch with the British high

street and its flagships being under so much stress.

In terms of corporate news, M&A is spicing things up in the telecom sector with France’s

Orange (LSE: 0OQV.L - news) reportedly considering a bid for Spain’s Euskatel. Still in the sector, Telecom Italia

has said it expects 2018 core earnings to drop by less than 5 pct.

As the earnings season starts to build up in Europe, expectations are low. According to

I/B/E/S Refinitiv, fourth-quarter earnings per share (EPS) for STOXX 600 companies are expected

to have grown by 6 percent, more than half the levels seen in Q3 and Q4 2017.

Hellofresh is expected to surge at the open after saying it expects revenues above its

forecast.

Supermarket retailer Casino, which is battling investor concerns over its high debt, said

revenue growth slowed down slightly in the fourth quarter as anti-government protests in France

impacted sales at its Geant hypermarkets. Its shares are seen rising at the open.

Irish low-cost carrier Ryanair Holdings (Frankfurt: RY4C.F - news) cut its forecast range for full-year profit, as it

expects fares during the winter season to fall more than expected, news that will likely dent

the shares.

Another development on the Ghosn/Renault (LSE: 0NQF.L - news) with news the CEO improperly received 7.8 million

euros ($9 million) in compensation from a joint venture (JV) between Nissan and Mitsubishi (LSE: 7035.L - news) .

In the banking sector, which received a blow from SocGen’s profit warning yesterday, Italy's

Banca Carige (Dusseldorf: -BJ51.DU - news) has filed a request to tap a state guarantee for an upcoming bond issue.

Here's a list of key headlines:

ANALYSIS-Reality check for Europe Inc: investors brace for bumpy Q4 results season

Ghosn received $9 mln improperly from Nissan-Mitsubishi JV -companies

Rio Tinto (Hanover: CRA1.HA - news) 's 2019 iron ore guidance at lower end of forecasts

U.S. grand jury indicts 4 Audi (IOB: 0FG8.IL - news) managers in VW emissions probe

FDA advisory panel split over Sanofi (LSE: 0O59.L - news) -Lexicon diabetes drug

Car (HKSE: 0699-OL.HK - news) service firm Mekonomen (LSE: 0HDJ.L - news) warns on profit, European market "abnormally weak"

Telecom Italia sees FY organic EBITDA at 8.1 bln euros

Italy's Carige could get green light for state-backed bond issue soon - minister

Fitch Downgrades Carige to 'CCC'; on Rating Watch Evolving

Retailer Casino keeps goals although French protests impacted sales

Lagardère Announces Exclusive Negotiations For The Sale Of Billetreduc.Com to FNAC Darty

Takeaway.com Raises EUR 680 Mln Via New Shares And Convertible Bonds Issue

Eni Says Board Of Directors Approves Bond Issue

(Julien Ponthus and Josephine Mason)

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AND UP IT IS! (0709 GMT)

European futures have opened and they're comfortably up as expected with the trade war

optimism doing its magic.

Futures on the other side of the Atlantic are also in the black, which seems to indicate

that global sentiment is indeed positive.

(Julien Ponthus)

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TRADE HOPES SEEN LIFTING EUROPEAN SHARES AT THE OPEN (0620 GMT)

Optimism about the Sino (Dusseldorf: 1205802.DU - news) /U.S. trade talks has lifted stocks from Wall Street to Asia and

there's really no reason it wouldn't fuel some good old risk-on across European bourses.

According to IG (Frankfurt: A0EARV - news) , financial spreadbetters expect London's FTSE to open 36 points higher,

Frankfurt's DAX up 45 points and Paris' CAC to rise 28 points.

That said, as usual with the trade war saga, sentiment could change quickly as the U.S.

position is not crystal clear.

The Wall Street Journal reported that Mnuchin discussed lifting some or all tariffs and

suggested offering a tariff rollback during trade discussions BUT also that Trade Representative

Robert Lighthizer has resisted the idea.

Here's the story:

Treasury Secretary Mnuchin weighs lifting tariffs on China-WSJ

(Julien Ponthus)

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