UK Markets close in 2 hrs 24 mins

LIVE MARKETS-Is value (finally) making a comeback?

* European shares up 0.3% * EU expected to start infringement procedure against Italy * Italy's FTSE MIB lags, down 0.3%, as banks fall * Asian shares rise on signs of Fed interest rate cut * Norsk Hydro beats, NSF backs out of Provident bid June 5 - 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 IS VALUE (FINALLY) MAKING A COMEBACK? (0858 GMT) Yesterday's rally had many of the hallmarks of a short squeeze and a rotation towards value, with depressed car and bank stocks leading the charge. Of course, it may be a false dawn for the market factor which has consistently underperformed. Just last week, Bernstein rowed back on their March bet on Value. "The key question is whether that is a short-term blip or a more sustained switch from 'momentum' investing back to a more fundamental approach of 'intrinsic value'," write Mirabaud Securities strategists. If you are ready to take a punt, Mirabaud have helpfully sorted through the value end of the market to come up with a 58-strong list of potential picks. They look for stocks that offer 50% upside on a three-year view. But of course, such a screen can just unearth stocks that are cheap for good reason - "hello Deutsche Bank", they quip. So they add the extra criteria of positive earnings revisions momentum, and generating value on an 8% discount rate. Among the stocks they find - across a variety of sectors - are Capita, G4S, Electrolux, WPP, Schibsted, Persimmon, Adecco, Generali, Total, Aviva, Swatch, Hugo Boss, Schroders, Fresenius Medical Care, Volvo, Michelin, and AB InBev. On a possible rotation into value, Barclays looks downbeat: "The valuation dispersion between Growth/Quality and Value stocks is extreme, but bond yields need to rise for Value to rebound, which looks unlikely for now." (Helen Reid) ***** "EUROPE'S CHRONIC PROBLEMS ARE NOT GOING AWAY" (0832 GMT) The painful sell-off we saw last month has removed complacency from the market but Barclays strategists advise clients to stay defensive, saying that even though many negatives are likely to have been priced in, "Europe's chronic problems are not going away". "The market looks less vulnerable to bad news and could thus stabilise, but fundamentals and geopolitics call for continued caution," they say. "The region trailed global/U.S. benchmarks in seven of the last ten years, mostly due to weaker earnings. Low domestic growth, declining Banks profitability, lack of Tech, over-reliance on the 'old economy', messy politics and trade exposure have turned the region into a consensus Underweight. European equity funds have seen almost uninterrupted outflows for more than a year now, and U.S. investors have turned net sellers year-to-date, for the first time in four years," they add. With that in mind, they made a few tweaks in their allocations, while keeping their market weight Europe vs the US recommendation. Here are the main changes: * Moving UK to Overweight vs Eurozone (FX hedged): Brexit uncertainty likely provides a cap to GBP, which helps UK stocks as they derive 70% of revenues from abroad; the UK market is biased to defensive and commodity sectors, which we like, and its relative valuations are attractive. We turn long exporters (FTSE100) vs. domestic plays (FTSE250) * Shift from DAX to CAC, and stay with preference for Spain over Italy : DAX outperformed year-to-date but could be at risk if the trade war escalates, and is also overly exposed to EM/China and manufacturing. We close our Overweight and add to France, which has a more diversified sectoral and regional exposure. Italian political concerns are unlikely to go away any time soon and the fiscal situation is fragile; Spanish fundamentals and politics are healthier (Danilo Masoni) **** OPENING SNAPSHOT: FED BOOST FADES, PROVIDENT JUMPS (0721 GMT) European stocks are treading water this morning as a rally after yesterday's Fed comments fizzles out slightly. Car stocks, the drivers of yesterday's gains, are falling back, down 0.6%, while tech is the top gainer, up 0.7%. Norsk Hydro is top of the STOXX, up 5.4% after it beat both top-line and bottom-line expectations, and as investors swallowed the 300-350 million crown cost of a cyber-attack in March. Provident Financial shares are up 7.6% after Non-Standard Finance dropped its hostile bid for the company. And Hargreaves Lansdown shares are down another 4% after yesterday's slide as the fallout from investor Neil Woodford's fund gating makes itself felt. In other notable movers, Dassault Aviation is up 4.5% after GS upgraded the stock to a "buy". Italian banks are down 1.4%, giving back part of yesterday's rebound. The European Commission is expected to begin disciplinary procedures against Italy later today over the country's failure to reduce public debt as required by EU law. (Helen Reid) ***** WHAT'S ON THE RADAR: NORSK HYDRO BEATS, NSF BACKS OUT OF PROVIDENT BID (0648 GMT) European stocks are set to hold onto their gains after comments from the U.S. Federal Reserve widely interpreted to mean the central bank would consider cutting interest rates swept markets higher in the previous session. Gains in sterling, after the Conservative Party set out rules for its leadership election which would eliminate contenders more rapidly, are likely to weigh on the FTSE 100, while Germany's DAX, which led the rally on Tuesday, is set to fall back slightly. News that subprime lender Non-Standard Finance is dropping its hostile 1.3 billion pound bid for rival Provident Financial is seen boosting shares in the latter, which are down 22% this year. Shares in Non-Standard Finance are meanwhile expected to take a hit of around 1% due to the strategic shift and uncertainty. Italian assets are in the spotlight today with a decision expected from the European Commission over what punitive measures it will take against the Italian government for flouting fiscal rules. Norway's Norsk Hydro is expected to gain 2-5% after revenue and earnings beat expectations although the aluminium producer said a cyber attack in March would cost it between 300 million and 350 million crowns. Strong results from Salesforce in the U.S. could have a positive effect for European peers SAP and Software. (Helen Reid) ***** EUROPEAN FUTURES EDGE HIGHER AS ITALY VERDICT AWAITED (0618 GMT) Futures are looking a bit sluggish this morning but certainly pointing to an extension of yesterday's rally, at least at the start. But all eyes are on Italy today as a verdict from the European Commission on possible punitive steps is awaited after the country flouted its fiscal policy rules. Early reports from La Repubblica indicate the Commission is set to start the infringement process against the government. A rise in the pound to $1.2717 after the Conservative party set out its timetable for a leadership election, agreeing rules to eliminate candidates more quickly, will likely weigh on the exporter-heavy FTSE 100. (Helen Reid) ***** FED-FUELLED RELIEF RALLY TO CONTINUE (0543 GMT) European stocks are expected to keep climbing this morning as signs from the Fed that they're prepared to cut rates triggered some relief across the market. Asian shares tracked Wall Street's rally on Wednesday, after U.S. central bank comments pointed to increasing prospects of an interest rate cut, boosting investor sentiment and pushing the dollar lower. Financial spreadbetters expect London's FTSE to open 15 points higher at 7,229, Frankfurt's DAX to open 40 points up at 12,011, and Paris' CAC to open 17 points higher at 5,285. Here are your early headlines: Norsk Hydro Q1 core profit plunges after cyber attack FCA-Renault deal talks navigate French political hurdles Sanofi loses German patent case against Amgen over cholesterol drug Euronext seals victory over Nasdaq by securing 61.4% in Oslo Bors BRIEF-Novartis AG Says Long-Term Survival Benefit Shown For Metastatic Melanoma Patients Treated With Novartis Tafinlar + Mekinist Italy deputy PMs discussed option to exceed 3% budget deficit - paper (Helen Reid) ***** (Reporting by Helen Reid, Danilo Masoni, Josephine Mason and Thyagaraju Adinarayan)