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LIVE MARKETS-UK stocks: how to navigate Brexit negotiations

* European shares supported by oil stocks

* SSE (LSE: SSE.L - news) profit warning weighs on utilities

* Italian stocks hit as budget tensions resurface

* Tech stocks weigh on Wall Street

Sept 12 - 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:


With (Other OTC: WWTH - news) the newsflow on Brexit sounding relatively positive this week, there's been more

optimism around the UK and especially sterling, though markets remain hyper-sensitive to any

changes in the tone of negotiations as the deadline approaches.

We've written previously about value investors circling around cheap UK stocks, but some say

the price is still not adequately compensating for the risks.

"UK stocks look under-owned and attractively valued but a catalyst is missing for a sharp

reversal," say Barclays (LSE: BARC.L - news) ' European equity strategists Emmanuel Cau and team.

"Energy weighs circa 20 percent of UK market cap, which helps earnings, but EM exposure is a

headwind," they add in a note titled "Navigating troubled waters".

On top of this, a stronger pound adds pressure to the FTSE 100 whose companies derive most

of their earnings abroad.

However, the strategists still prefer exporters, though they acknowledge domestic plays

could enjoy a rebound on more positive Brexit news.

Overall they reckon a "crash out" of the European Union is still an unlikely outcome, which

if it comes to pass, could turn the correlation between sterling and UK stocks positive as both


Here's Barclays' handy chart - or "choose your own adventure" - of where things could go

from here:

(Helen Reid)



Analysts had warned that it was going to be a bumpy ride for Italian assets going into the

budget announcement at the end of the month. And they were right!

Worries over Rome's spending plans have eased recently, fuelling a recovery in Italian

stocks and bonds, but some headlines today saying economy minister Tria could be

forced to quit caused some pretty turbulent moves in Italian stocks and bonds.

The FTSE MIB took a 1.4-percent leg lower after ANSA said 5-Star would seek Tria's

resignation if they did not get 10 billion euros to create a universal income for the poor. The

report was denied and the blue chip index recovered rapidly.

And here's your snapshot with main European country indexes.

(Danilo Masoni)



For growth-focused investors it hasn't been easy to avoid paying over the odds for the

Growth companies which have been market leaders - and hence very popular picks - over the past

several years.

We just spoke to one fund manager who focuses on European companies with more than 10

percent earnings growth, high barriers to entry, and visibility on growth.

"We end up having quite significant weights in sectors like healthcare, consumer, IT, and we

tend to be underweight banks and financials," says Alistair Wittet, European equities portfolio

manager at Comgest.

Indeed he says his funds - pan-European, smaller European companies, and Europe ex-UK - own

no banks, autos, or oil & gas stocks, instead focusing on the areas considered "growth".

But global uncertainty, and a significant outperformance of Growth over Value (see below)

has accelerated flows going into these growth and defensive sectors, pushing prices up.

"There are pockets of the market where valuations have reached historically quite elevated

levels," notes Wittet, adding: "We have been reorienting our portfolio to invest in those stocks

where we haven't seen valuations expand so extremely."

Wittet owns L'Oreal, LVMH, Hermes, in the consumer area, Novo Nordisk (LSE: 0QIU.L - news) and Sartorius (IOB: 0NIQ.IL - news) in

healthcare, and Amadeus, SAP (Amsterdam: AP6.AS - news) , and ASML (Milan: ASML.MI - news) in the IT sector.

On the record outperformance of Growth, Wittet says "by definition it can't continue", but

he doesn't see any clear triggers for a Value comeback any time soon.

(Helen Reid)



The profit warning from SSE is making utilities the worst sectoral performer today

but in a market dominated by a diverse range of geopolitical and economic concerns, the

defensive nature of the often overlooked industry can be a plus.

No surprise then that some market players are turning more constructive on the sector.

Among them is Morgan Stanley (Xetra: 885836 - news) , who has been rather cautious on utilities for the past 9 years

due to a difficult operating environment, falling commodity prices and political intervention.

"So what has changed? We now see some upside to consensus, and we expect the sector's 2020

EPS to move higher as consensus reflects current forward prices and updated business plans,"

analysts at the U.S. investment bank say.

They see growth remaining strong at 11 percent in 2019 and 2020.

And the good news is that there are also catalysts ahead:

* Enel (LSE: 0NRE.L - news) , Snam (Amsterdam: QE6.AS - news) , Drax and Oersted hold capital markets

days in


* The end of the coal negotiations in Germany, resetting of allowed returns in Italy, and


energy transition law could remove overhangs

* Going into winter, risks to power prices remain tilted to the upside, which should be


for the sector

(Danilo Masoni)



European shares are bouncing back somewhat this morning with gains of 0.1 to 0.5 percent,

boosted by strong oil and mining stocks.

Galapagos (LSE: 0JXZ.L - news) is stealing the spotlight, up 14.2 percent at the top of the STOXX after positive

trial results for its filgotinib drug to treat rheumatoid arthritis.

SSE is down more than 9 percent after warning its first-half profit would halve.

Meanwhile Inditex and Hermes are both rising after strong results. The Zara owner is up 2

percent after it said it saw margin growth in the second half.

Hermes shares are up 2 percent after it reported record first half margins.

Also in luxury, Salvatore Ferragamo (LSE: 0P52.L - news) is top of Italy's FTSE MIB, up 3.8 percent due to M&A

rumours which the company's spokeswoman has denied, saying the Ferragamo family - the top

shareholder - does not want to sell its stake.

(Helen Reid)


WHAT'S ON THE RADAR FOR THE OPEN: INDITEX (Amsterdam: IT6.AS - news) , HERMES, SSE (Amsterdam: UW8.AS - news) (0652 GMT)

Stock futures in Europe are rising in early trading, indicating markets could muddle through

despite a weaker Asian session as investors fret about the latest ramp-up in rhetoric on trade

between Beijing and Washington, with President Trump saying the U.S. is taking a “tough stance”

with China.

Oil stocks are likely to support benchmarks after crude prices were boosted by declining

U.S. crude stockpiles.

On the corporate front, Inditex results could move shares in the Zara owner. Its first-half

earnings and sales missed expectations and the company changed its way of disclosing sales

growth, a shift which analysts at Berenberg said could raise questions and be taken negatively.

Hermes is seen flat to 1 percent higher after reporting record first-half margins, with

traders also comforted by the CEO saying there has been no change so far in sales in China.

More bad news for serviced offices provider IWG (LSE: IWG.L - news) could weigh the stock further: the company’s

chief operating and financial officer has left. IWG’s shares fell last month after it abandoned

talks with three suitors.

And a profit warning from British energy provider SSE could also likely hurt the stock with

one trader calling it down 5 to 10 percent after it warned first-half results would be cut by

half, blaming the fall on dry, still and warm weather and high gas prices.

Wind turbine maker Nordex (EUREX: 2083267.EX - news) is up 3 percent in pre-market after being awarded big-ticket

contracts to build turbines in South Africa.

(Helen Reid)



Futures are up, contrary to spreadbetters' expectations, between 0.2 and 0.4 percent,

indicating markets could struggle through today despite a weak Asian session overnight.

But the latest developments on the Brexit front and within the UK government will keep

investors on edge.

In his State of the Union speech, Jean-Claude Juncker is set to say Britain should not

expect EU negotiators to soften demands, but he will reaffirm an offer of a close future

partnership, a senior EU official said.

And there are new signs of dissent in the UK government with the BBC reporting about 50

Conservative lawmakers have met to discuss how and when they could oust May from power.

The latest UK corporate headlines:

Superdry appoints ex-Tommy Hilfiger exec Brigitte Danielmeyer chief product officer

Indivior Reiterates FY Sublocade Net Revenues Of $25 Mln-$50 Mln

John Laing Environmental Assets to raise 50 mln stg via new shares

(Helen Reid)



On the slate today we have European Commission President Jean-Claude Juncker's last State of

the Union ,seven months before the European Parliament is dissolved.

"He will call for a comprehensive response to U.S. protectionist threats, with ideas how to

avoid EU companies being affected by U.S. sanctions," write Societe Generale (Swiss: 519928.SW - news) economists.

On the corporate and general news front here are a few of the main headlines:

Zara owner Inditex H1 profit up 3 pct on year

HSBC to bolster Asia private banking headcount, double client assets

Wrong Brexit will cost tens of thousands of car jobs, warns Jaguar boss

Former Volkswagen boss dragged feet in emissions scandal - judge

Ryanair pilots, cabin crew in Germany stage strike

UK Supermarket chain Morrisons faces equal pay claims worth 1 billion pounds

China is "one of the bigger risks" to global economy - BoE (Shenzhen: 000725.SZ - news) 's Carney

(Helen Reid)



European stocks are set to fall further this morning after Asian markets took a deeper dive

on the latest escalation in rhetoric between the U.S. and China.

Asian stocks slipped to 14-month lows as investor confidence was chilled by the latest round

of verbal threats in an intensifying U.S.-China trade conflict.

China told the World Trade Organization (WTO) on Tuesday it wanted to impose $7 billion a

year in sanctions on the United States in retaliation for Washington's non-compliance with a

ruling in a dispute over U.S. dumping duties started in 2013.

Separately, U.S. President Donald Trump told reporters on Tuesday that the United States was

taking a tough stance with China.

Financial spreadbetters expect London's FTSE to open 5 points lower at 7,268, Frankfurt's

DAX to open 16 points higher at 11,986 and Paris' CAC to open 11 points higher at 5,294.

(Helen Reid)


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