LIVE MARKETS-USD LIBOR GREATER THAN SHIBOR = ?

* European stocks rebound, set for weekly drop

* Bank results in focus: Credit Agricole (Swiss: ACA.SW - news) , RBS (LSE: RBS.L - news) rise

* Apple (NasdaqGS: AAPL - news) hits $1 trillion stock market valuation

* Wall Street edges up at the open

LONDON, Aug 3 (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

USD LIBOR GREATER THAN SHIBOR = ? (1525 GMT)

One interesting thought from Rabobank's Global Daily this morning was that maybe we should

focus a bit less on the U.S. yield curve and turn our attention to what's going on with Chinese

interest rates.

The bank's analysts note that the 3-M SHIBOR has fallen from 4.9 percent to 3.06 percent

since the beginning of 2018 while at the same time the USD LIBOR rose from 1.69 percent to 2.34

percent. That could spell more weakness for the Chinese yuan.

"That means it's not just 'how many Fed hikes until inversion' we need to worry about, but

how many Fed hikes until LIBOR > SHIBOR and CNY really falls out of bed to 7, 8, etc..",

Rabobank analysts wrote.

"At the present pace, from the Chinese side alone, that might be around the time of the next

Fed hike in September", they added.

Here's how the USD LIBOR and SHIBOR seem to be converging:

(Julien Ponthus and Ritvik Carvalho)

*****

HUNTING FOR GEMS IN UK STOCKS (1448GMT)

The UK might be unloved, but some portfolios managers are seeing opportunities.

James Clarke, portfolio manager at Brandywine Global, says that the UK is their biggest

positioning in their international fund.

Clarke (Toronto: CKI.TO - news) says that they are actually looking for domestic exposure instead of the UK's

international earners (which seemed to be the trade du jour back when the pound went for a

post-Brexit vote dive -see chart below).

"What's the opposite of FANGs? How about an 8x earnings home builder in the UK? How about an

oil stock? Things like that that have been utterly ignored because it looks so easy to make

money in Amazon - at some point that stops. And maybe it already has, we will see," says

Brandywine Global's Clarke.

While there are some areas which Clarke says they aren't fans of, such as retail, some of

the domestic UK businesses they own include Card Factory (Frankfurt: A114CM - news) and house builder Barratt Developments (Frankfurt: 859551 - news) .

The other area they like is oil.

(Kit Rees)

*****

BANK EARNINGS, WAIT FOR IT...(1425 GMT)

European banks are among the most unloved stocks this year but there's something about this

earnings season which begs the question: are investors about to have a change of heart?

RBS' first dividend in a decade is fuelling enthusiasm for the sector and Credit Agricole's

better than expected results have pushed the French farmers' historical bank to the top of the

CAC 40 index this afternoon.

European banks are trading at a heavy PE discount in comparison to the STOXX 600 and a lot

of them offer dividend yields which make most benchmark fixed income assets look, well,

unattractive to say the least!

If there's a value investor reading this, it might be worth having a look below:

So are we at the turning point so many strategists have been hoping for and about to see the

banking index recover at last?

Well with HSBC publishing Monday, Commerzbank (Xetra: CBK100 - news) and Unicredit Tuesday, ABN AMRO Wednesday,

Raiffeisen and KBC Thursday, how about waiting another week before drawing conclusions or

looking for a silver lining?

One has to bear in mind that the banking sector is really one for which there is little

consensus.

On the bright side, BNP Paribas (LSE: 0HB5.L - news) analysts say they "believe a slight tightening bias in the

latest round of central bank meetings is likely to benefit the banking sector, which has

suffered this year from a lower and flatter rates curve."

With (Other OTC: WWTH - news) that in mind they "expect the recent central bank announcements to be a catalyst for

the banking sector to move higher."

But any 'return to favour' for banks might be jeopardized by a growing trend among investors

to underweight cyclical shares as the trade war between China and the United States heats up.

Henna Hemnani, an assistant fund manager for Miton’s multi-asset fund, said it was time to

protect against risk as "the momentum in some of these cyclical sectors fade a little, namely in

materials, industrials and financials."

"On the back of this we have sold most of our financials and have diversified around our base

case exposure to basic industries by introducing some positions we consider to have more

defensible growth."

One fun fact: just as political risk is making a comeback in Italy, it's worth noting that

among the handful of banks in the black YTD, one can find Italy's FinecoBank Banca (+17 pct) and

Bper Banca (+8.5 pct).

Also Italian activities are taking a good chunk of the credit for Credit Agricole's better

than expected results.

But, as many note today, Italy may become messy again for the banking sector:

Here's the story:

Renewed Italian government tensions fuel bond sell off

(Julien Ponthus)

*****

EARNINGS UPDATE: SQUEEZED MARGINS AND OUTSIZE MOVES (1339 GMT)

BAML strike a pessimistic tone in their wrap of European earnings thus far. European

companies have delivered only 44 percent EPS beats, far below the average, they note (see chart

below).

"This is a small improvement on last week, but still the lowest proportion in six years,

driven by a record number of firms merely meeting expectations (23%)," write strategists at the

U.S. bank.

Profit margins have disappointed in every sector except for Autos, they say, nodding to

Bowie with their title "Under (margin) pressure".

Following this year's theme of leadership rotation, the underdogs in share price terms are

outperforming in earnings terms. The strongest-performing sector in terms of EPS beats is banks,

followed by media and retail.

Bottom of the class for EPS beats are travel, construction and utilities.

Echoing Goldman Sachs' observations earlier this week, BAML strategists say results moves

have been big and there's been a record spread in performance. Earnings misses underperformed by

1.9% over the following 5 days, while beats outperformed by 3.5%. Profit warnings caused

particularly bad selloffs.

Big moves have contributed to an increase in equity market breadth which has helped

investors become slightly more confident this week.

(Helen Reid)

*****

WALL ST FUTURES LITTLE CHANGED AFTER PAYROLLS (1303 GMT)

U.S. stocks index futures are pointing to a flat open in the wake of a monthly payrolls

report that fell short of expectations.

Nonfarm payrolls increased by 157,000 jobs last month, the Labor Department said. The

economy created 59,000 more jobs in May and June than previously reported. The shortfall is

likely due to companies' struggles to find qualified workers and the unemployment rate fell to

3.9 percent, indicating conditions in the labor market continue to tighten.

Other data showed the U.S. trade deficit recorded its biggest increase in more than 1-1/2

years, jumping 7.3 percent to $46.3 billion, in June as the boost to exports from soybean

shipments ahead of Chinese tariffs faded and higher oil prices lifted the import bill.

In the latest round of the tariff dispute between the U.S. and China, the Chinese government

proposed a new set of tariffs on about $60 billion import items in a range of 5 percent to 25

percent.

(Chuck Mikolajczak)

*****

AFTERNOON SNAPSHOT: STOXX SET FOR WEEKLY DROP (1308 GMT)

European shares may be on the up today but the bounce is not enough to prevent the regional

STOXX 600 benchmark from being on track for its first weekly loss in five.

While Wall St futures are flat after data showing that job growth in the world's No.1

economy has slowed more than expected this month, the European index is edging 0.5

percent higher. On the week however it is still down 0.9 percent.

(Danilo Masoni)

*****

THE M&A SURGE OF 2018, IN NUMBERS (1028 GMT)

Mergers and acquisitions have been a dominant theme this year in Europe and the world, with

deal volumes reaching levels that some see as worrying signs of an ageing bull market reaching a

peak.

Global M&A activity is up 47 percent compared to a year ago, with $2.75 trillion in deals

announced, the latest Thomson Reuters (Dusseldorf: TOC.DU - news) data shows. M&A in the U.S. is up 57 percent year-on-year,

while in Europe it has surged 79 percent. Top of the table among target nations for cross-border

M&A are the UK (+169% yoy) and Spain (+354% yoy).

Among sectors healthcare, media, and telecoms stand out as seeing the biggest year-on-year

boost in dealmaking - unsurprisingly as these defensive sectors are facing structural pressures

driving consolidation.

IPOs meanwhile have risen 20 percent in the Americas while they've fallen 3 percent in

Europe.

(Helen Reid)

*****

OPENING SNAPSHOT: EUROPEAN STOCKS ON THE MEND (0711 GMT)

European stocks have opened slightly higher as they rebound from two straight days of

selling on the back of trade-related worries.

Individual moves aren't huge early on but banks Credit Agricole and RBS, which both gave

half-year updates, are among the top STOXX 600 risers.

Likewise paper and packaging firm Mondi (Frankfurt: KYC.F - news) is topping the index with a 4.3 percent rise after

its H1 results beat expectations.

Here's your opening snapshot:

(Kit Rees)

*****

WHAT'S ON THE RADAR FOR THE EUROPEAN OPEN (0642 GMT)

European stocks were set for a positive end to the week, with futures up 0.3 to 0.4 percent

across the region’s benchmarks in an increasingly familiar pattern of trade war driven selloffs

followed by relief as investors contemplate a still-strong earnings season.

Market turbulence over the week as Trump threatened higher tariffs on Chinese imports had

set the STOXX 600 up for its worst week since March, but gains on Friday – boosted in part by

Wall Street’s tech-led rally - are likely to spare the index.

Earnings are still front and centre with Credit Agricole adding to a slew of positive bank

results, shares seen up 2 to 3 percent after it reported Q2 profit above forecasts.

British lender RBS is also seen rising 2 percent after announcing its first dividend in a

decade.

M&A is coming back into play with Heineken (LSE: 0O26.L - news) sealing a $3.1 billion tie-up with China’s

largest brewer, China Resources Beer, to take a 40 percent stake in the company. Heineken shares

are indicated up 2 percent in pre-market.

Disappointing results causing cybersecurity firm Symantec’s shares to fall 9.4 percent in

U.S. after-hours trading could also weigh on Britain’s Avast and Sophos, traders say.

And Apple’s ascension to the $1 trillion market cap mark could deliver a boost to shares in

chipmakers - some of which supply the iPhone maker - in Europe.

(Helen Reid)

*****

EARNINGS AND M&A ON THE MENU FOR TODAY (0553 GMT)

Results from Allianz (Swiss: ALV-EUR.SW - news) , Credit Agricole, Swiss Re (LSE: 0QL6.L - news) , will jostle for investors' attention with

Italian banks Banco BPM and UBI Banca (Amsterdam: UF8.AS - news) today, after Poste Italiane (Dusseldorf: 29884131.DU - news) shares fell yesterday on a

weaker solvency ratio due to the selloff in Italian government bonds.

State-owned lender Monte dei Paschi (Milan: BMPS.MI - news) this morning reported Q2 profits and revenues fell.

And Heineken is likely to be a big mover after it sealed a whopping $3.1 billion tie-up with

China Resources Beer, sending the latter's shares up 10 percent in Hong Kong.

Allianz net profit down 5 pct but on track to meet 2018 target

French bank Credit Agricole posts higher Q2 net profit above forecasts

Heineken seals $3.1 bln tie-up with China Resources Beer, shares surge

Swiss Re says H1 profit down 17 pct on accounting changes

Monte dei Paschi Q2 profits fall, confirms positive business trend

(Helen Reid)

*****

EUROPEAN STOCKS SET FOR END-OF-WEEK BOUNCE(0528 GMT)

European stocks are set for a strong open this morning after a torrid week so far left the

STOXX on track for its worst week since March (see chart below). It's another relief bounce in a

pattern that's becoming familiar to investors: sharp trade war-driven selloffs followed by

sudden rallies.

Apple's market cap hitting the $1 trillion mark helped lift Wall Street with the effect

likely to be felt in European markets too, while earnings remain in the spotlight with Allianz

and Credit Agricole among those reporting.

Spreadbetters expect London's FTSE to open 42 points higher at 7,618, Frankfurt's DAX to

open 46 points higher at 12,592 and Paris' CAC to open 24 points higher at 5,485.

Asian stocks inched up overnight, following a tech-led rise on Wall Street, although the

latest exchange of trade threats between Beijing and Washington limited gains and drove

safe-haven flows to the dollar, which brushed a two-week high.

(Helen Reid)

*****

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