LIVE MARKETS-Wanna play Brexit?

* European shares open lower

* Italian banks hit 19-month low

* Royal Mail (LSE: RMG.L - news) falls another 8 pct

Oct (Shenzhen: 000069.SZ - news) 2 (Reuters) - Welcome to the home for real-time coverage of European equity markets

brought to you by Reuters stocks reporters and anchored today by Danilo Masoni. Reach him on

Messenger to share your thoughts on market moves: danilo.masoni.thomsonreuters.com@reuters.net

WANNA PLAY BREXIT? (0924 GMT)

Let's forget Italy for a moment and turn to Britain.

Natixis (LSE: 0IHK.L - news) equity derivatives strategists Eric Benoist and Sav Vedi liken the drama around

Brexit to "a power struggle of Shakespearean proportions" and look at the rationale for a long

positioning in UKX volatility.

"As we approach the withdrawal deadline, we expect asset prices to become increasingly

volatile to news flow. The increased uncertainty surrounding the nature of Brexit has

historically manifested in pound volatility and weakness. We expect the GBP to remain volatile.

However, we do not see the FTSE 100 (UKX) volatility being dampened by that effect, as GBPUSD

and UKX correlation picks up," they say.

"Contrarily, we expect UK assets to face turbulent times, and we postulate it may be

appropriate to position now for higher UKX equity volatility," they conclude.

The UKX 12-month ATM implied volatility is trading about 1 standard deviation from its

5-year mean, and strategists at the French bank say that is an interesting entry point.

And here is Shakespeare, in a First Folio discovered nearly 400 years after his death.

(Danilo Masoni)

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MORNING SNAPSHOT: ITALIAN STRESS SPREADS (0855 GMT)

A war of words between European officials and the Italian government is fuelling worries

that the euro zone may be heading into a crisis and while that is hitting hard Italian assets,

the rest of Europe is feeling the pain too.

"Italy remains front and centre for investors in Europe as tensions between Rome and

Brussels seem to be mounting," says Neil Wilson, chief market analyst for Markets.com.

"Talk of a fresh crisis seems overblown at present, but it does look as though the EU and

the Italian government are set for a major clash that will have far-reaching ramifications for

the EU and the Italian economy, even if it does look rather like markets are getting overly

twitchy over a couple of percentage points in the deficit," he adds.

As you can see in the snapshot no European benchmark is trading in positive territory,

although selling pressure appears to have eased somewhat, as the economics spokesman of the

right-wing League, Claudio Borghi, sought to clarify his earlier remarks which spooked investors

by saying: "Leaving the euro is not in the government's programme and it has no plans to do so".

(Danilo Masoni)

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WHAT WE'RE WATCHING BEFORE EUROPE OPENS (0652 GMT)

Weak Chinese manufacturing sector surveys and fresh anti-euro rhetoric in Italy

from the head of the lower house's budget committee are set to weigh on European

shares at the open with stock index futures trading down as much as 0.7 percent.

Besides the sovereign stress on Italian banks, which could drag euro zone banks lower, UK

housebuilers will be in focus after data showed house prices rose 2% in September, topping

expectations, and ahead of the construction PMI for the same month which is expected to have

remained constant. The sector was hit yesterday by worries over plans to levy an extra fee on

foreign buyers of homes.

On the corporate front, Akzo Nobel (Amsterdam: AKZA.AS - news) is on the watchlist after the Dutch paintmaker said it

would return 5.5 billion euros to shareholders, fulfilling a promise to give shareholders the

large majority of proceeds from the sale of its specialty chemicals unit.

Some minor dealmaking could also impact share prices with Veolia raising 340 mln euros from

the sale of its transport unit, and France cutting down its stake in aerospace firm Safran (LSE: 0IU8.L - news) .

Eyes also on the auto sector and possible comments on the outlook for global trade, electric

cars and diesel costs on the first press day of the Paris auto show.

Other stock movers: Thyssenkrupp (IOB: 0O1C.IL - news) might exit German benchmark index after split - WAZ;

Ferguson posts higher profit on strong U.S. industrial demand; Wintershall DEA eyes listing in

H2 2020, says Handelsblatt; BNP Paribas promotes investment banker Gerardin to deputy chief

operating officer; Renault (LSE: 0NQF.L - news) offers trade-in incentives for German diesel owners; DX Group posts

smaller-than-expected loss as turnaround plan pays off

For more headlines check out the previous post.

(Danilo Masoni)

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EARLY MORNING HEADLINES ROUNDUP: AKZO NOBEL, MINOR DEALMAKING (0558 GMT)

Among the stocks to watch this morning at the open is Akzo Nobel after the Dutch

paintmaker fulfilled its promise of returning billions to shareholders. We'll also be watching

the reaction to some small dealmaking activity. Here's an early corporate headlines roundup:

Akzo Nobel to return 5.5 bln euros to shareholders after division sale

Veolia sells Transdev transport unit stake to Rethmann for 340 mln euros

France sells 2.35 pct Safran stake to finance innovation fund

MEDIA-Natixis eyes stakes in boutique investment banks - FT

German parties agree diesel costs deal - but keep it secret

Whitbread (Frankfurt: WHF4.F - news) scraps post of operations manager at its Premier Inns

UK's Co-op strikes green plastic bag deal with Italy's Novamont - source

Vedanta shareholders back London delisting amid protest

Italy Sept car sales fall 25 pct as stiffer emission tests weigh

StanChart (HKSE: 2888-OL.HK - news) braces for possible new Iran fine of about $1.5 bln - Bloomberg

easyJet founder sues Netflix (Xetra: 552484 - news) over "Easy"

Sports Direct dismisses House of Fraser senior management

(Danilo Masoni)

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MORNING CALL: ITALY BUDGET WOES SET TO WEIGH ON EUROPEAN OPEN (0522 GMT)

European shares are expected to open lower today following losses in Asia and as investors

remain cautious following the Italian government decision to raise its budget deficit target,

breaching EU rules.

"This uncertainty along with weakness in Asia looks set to weigh on European markets this

morning with a lower open expected," said CMC Markets (LSE: CMCX.L - news) analyst Michael Hewson.

Yesterday, top euro zone officials warned Italy that its plan to borrow billions of extra

euros to fund spending pledges could tip the bloc back into crisis.

Financial spreadbetters expect London's FTSE to open 18 points lower at 7,477, Frankfurt's

DAX to open 57 points lower at 12,282 and Paris' CAC to open 21 points lower at 5,486.

Over in Asia, stocks fell as the lift from an agreement that saved the North American free

trade deal faded, with cautious views on the global economy curbing risk sentiment.

(Danilo Masoni)

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