* STOXX 600 -0.8% Friday, down 1.7% this week
* Fresh Italian political tumult drags stocks lower; FTMIB hits June 7 low
* Bayer (DE: BAYGN ) surged on report of Roundup case settlement, but pares gains after company denial
* UK GDP contracts unexpectedly; FTSE 250 briefly dips
* Volumes unseasonably high Welcome to the home for real-time coverage of European equity markets brought to you by Reuters stocks reporters and anchored today by Josephine Mason. Reach her on Messenger to share your thoughts on market moves: firstname.lastname@example.org
CLOSING SNAPSHOT: ANOTHER WEEKLY LOSS (1605 GMT)
Fresh Italian political tumult and rising trade tensions between U.S. and China roiled financial markets sending European stocks 0.8% lower today, taking weekly losses to 1.7%.
Europe's second straight week of losses came as trade-sensitive mining, tech and auto stocks continued to bleed as Trump's escalation of his spat with China last week prompted investors to shun risky assets.
Italy's FTSE MIB .FTMIB sold-off sharply (-2.5%) today after Salvini said his coalition with the 5-Star Movement was untenable and called for early elections. Italian banking index slumped 4.5% to Oct'16 in its worst single-day performance since mid-May.
GO SHOPPING! (1401 GMT)
Weak sterling would mean it's a good time for foreigners to hit the shops in the UK. This doesn't just apply to tourists, but also to big corporations looking to acquire UK-based companies.
As persistent 'no-deal' Brexit worries continue to knock down values of shares and weaken currency, this would mean you could buy more for less dollars.
There have already been a few deals in the UK, but Liberum analysts believe there could be more as "sterling's prolonged weakness exacerbates the current discount that UK stocks offer."
Recent deals include WPP's WPP.L sale of Kantar to PE firm Bain Capital, Lego family and Blackstone (NYSE: BX ) snapping up Merlin Entertainments MERL.L , Takeaway.com TKWY.AS buying JustEat JE.L , among others.
A solid international footprint (30% or more exposure to Europe/U.S.), low valuation and a good cash profile are in the screening Liberum is applying to identify M&A targets.
Among names that make it to the top of the list are industrials, miners and leisure companies and sizes range from few hundred million pounds to multi-billion dollars.
At 9.5 times earnings, mining giant Glencore GLEN.L is seen as one of the targets: the stock lost 15% in little over one week hit by growing trade tensions, its plan to halt production at the world's biggest Cobalt mine and falling profits. Smaller miner Ferrexpo FXPO.L at just 4 times earnings is also on list of potential targets.
A handful of industrial companies including, packaging firms Mondi MNDI.L and DS Smith SMDS.L , Irish building materials group CRH (LON: CRH ) CRH.I and specialty chemicals maker Elementis ELM.L also make it to the list. These companies' exposure to foreign markets range from 47% to 98%.
Here's a look at some cheap names (based on P/E ratios) in the UK:
TRUMP'S FRESH TRADE THREAT IGNITES VOLUMES (1330 GMT)
Anyone thinking that price swings may have been exaggerated by low summer holiday volumes this week may need to think again. U.S. President Trump's escalation of his spat with China last week has reignited what has been pretty lacklustre turnover in equities so far this year.
Almost half a billion shares have traded in Frankfurt this week on top of the 512 million last week. That compares with the weekly average of about 450 million. More than 1 billion have changed hands on the pan European benchmark, and 1.1 billion traded last week, compared with 985 million on average. (see chart below)
Italy's blue-chip index .FTMIB and France's CAC 40 .FCHI saw above-average volumes last week (the major bourses all saw a huge jump last Friday as markets reeled from Trump's latest salvo) but activity has pared back somewhat this week as most of southern Europe heads to the beach.
MUTED REACTION TO DISMAL UK GDP (1141 GMT)
UK stocks are proving fairly resilient to the dismal GDP Q2 data that showed the world's fifth largest economy contracted for the first time since 2012, as the boost from pre-Brexit stockpiling ebbed and stirring worries about damage from the country's departure from the trading bloc.
Economic growth fell at a quarterly rate of 0.2% in the three months to June, below all forecasts in a Reuters poll of economists that had pointed to a flat reading. Year-on-year economic growth slid to 1.2% from 1.8% in the first quarter, its weakest since the start of 2018. monthly data showing April was the main culprit for the drop also warrants some scrutiny and may help explain the relatively quiet response.
"Dismal April, good May and flat June," says Edward Park, deputy chief investment officer at UK investment manager Brooks Macdonald.
"The market reaction to the UK's Q2 GDP contraction has been fairly muted driven by the fact that June was largely in line with market expectations but April, which is viewed as a Brexit anomaly, was the major reason for the quarter on quarter fall in economic activity."
The domestically focused FTSE 250 .FTMC fell into negative territory as the pound fell to match its lowest levels since January 2017, but it has recovered the lost ground and is now up 0.1%. Still, JP Morgan's basket of domestic stocks .JPDEUKDM is down 0.2% on the day.
Still shares in companies that make most of their cash in the UK have been pummelled of late - losses have deepened since Boris Johnson was appointed PM, increasing worry about a no-deal Brexit and triggering a rout in sterling.
The JPM index has lagged the FTSE 100 by 5% since the start of the year, compared with the exporter index .JPDEUKEX which has outperformed London's blue chips by 2.8%. (see the chart below)
"We would be cautious of reading too much into this quarter's figure, however it does show in the June numbers that the backdrop for production & manufacturing is quite weak, which means consumer demand is critical to keep economic activity in positive territory going forwards," says Park.
Investec economist George Brown and Deutsche Bank (DE: DBKGn ) UK economist Sanjay Raja don't expect it to herald a technical recession for the first time since 2009 because Q3 data will likely have a strong July due to the absence of automotive factory shutdowns.
"But evidently today's GDP release raises questions over the strength of the underlying momentum of the economy in the run-up to 31 October," cautions Brown.
And Brooks Macdonald is retaining its 'underweight' UK equities position given the economic uncertainties driven by political factors.
TRADE WAR "KILLED MY PERFORMANCE" (1024 GMT)
A whopping $12.4 billion left equities on Monday, according to BAML's latest fund flow data, as markets started the week with U.S.-China trade tensions scaling new peaks after Trump slapped another set of tariffs on Chinese imports.
The Black Monday (Aug. 5, not the several others we've seen) saw the 12th largest single-day equities outflows, and oh boy, the more staggering number is the $3.5 trillion value wiped off global equities in a span of just three days.
BAML's Michael Hartnett points to three pieces of top client feedback:
#1 AMERICA FIRST: ..."why bother investing outside of the US...no growth, no yield"
#2 CYCLICALS LAST: "trade war/recession risk too high, and they can (and have) killed my performance"
#3 JAPANIFICATION FOREVER: "zero rates in Japan & Europe don't work, so why should they in US, and how can we hedge quantitative failure?"
For the week to Aug. 7, equities saw the biggest outflows ($25 billion) since the December 2018 sell-off.
ANOTHER MONTH, ANOTHER POLITICAL CRISIS (0932 GMT)
"Seeing as it's only been a couple of months, it's about time we had some fresh political turmoil in Italy," quips Neil Wilson, chief market analyst at Markets.com in his morning note.
Cue leader of Italy's ruling League party and deputy PM Matteo Salvini pulling the plug on the governing coalition last night and calling for fresh elections in the hope that his party would win an outright victory over anti-establishment 5-Star Movement.
The fresh political upheaval in the euro zone's third largest economy is pummelling Italian stocks and government bonds, sending the blue chip index .FTMIB to June 7 lows and the banking index .FTIT8300 to its weakest since October 2016. Government 10-year bond yields are set for their biggest one day rise since May last year.
The budget crisis and prospect of ultra low rates for longer have already damaged bank stocks' valuations over the past couple of years. (see the chart below)
But more uncertainty and another looming battle over the budget with Brussels have shaken investor confidence anew. Wilson says a purely Salvini-led government would likely be more at odds with Brussels over the budget deficit, raising fresh risks for the euro-zone economy.
ActivTrades chief analyst Carlo Alberto de Casa agress: "The new budget is due soon and another battle with EU seems likely."
The tumult also raises the chance the ECB may opt for a bigger rate cut next month and beyond. The market is pricing in at least two cuts by the year-end.
For a rundown of what's next for Italy, check out: SCENARIOS-Italy's ruling coalition breaks down. What comes next? the meantime, brace for a wild autumn. An Italian general election could take place sometime in October ..... just as the UK is due to leave the European Union.
OPENING SNAPSHOT: IT'S ALL ABOUT ITALY (0733 GMT)
Prospects of an early election and renewed political tumult in Italy are roiling the country's banks as fresh political uncertainty sets in. The Italian banking index .FTIT8300 is down 4.2% at its lowest since October 2016 and that's casting a pall across euro-zone banks (-2%).
The pan-European STOXX 600 .STOXX index is down 0.2% with WPP WPP.L and G4S (CSE: G4S ) GFS.L rising 6% after their better-than-expected results. G4S also confirmed plans to separate its cash solutions business.
After banks, miners are the top sectoral fallers, weighed down by weak iron ore prices. China's iron ore futures were on course for their biggest weekly drop since March 2018. risers, the STOXX media index is the top performer, mainly driven by WPP.
EUROPE HEADING FOR WEAK OPEN; ITALY, CHIPMAKERS IN FOCUS (0656 GMT)
European stock futures point to a weak open with France seen sharply lower after yesterday's outperformance as rising political tensions in Italy and Huawei headlines overnight bring back turbulence in stock markets.
A Bloomberg report overnight that Washington will hold off on a decision about licensing U.S. companies to restart business with Huawei could hit chipmakers and trade-sensitive sectors. Dealers see Italian banks opening 2% lower after Matteo Salvini called for early elections.
Also worth keeping an eye for is UK GDP numbers, which are due at 0830 GMT.
In companies, Novo Nordisk NOVOb.CO is seen rising 2-3% as the Danish pharma company lifted its 2019 sales outlook after estimate-beating second-quarter results.
In the UK, Hikma is seen up 1% after it raised its sales outlook for the generic drug business and AstraZeneca AZN.L shares are expected to rise 1% after its trial showed its Tagrisso drug helps lung cancer patients live longer.
G4S GFS.L shares could get a lift after its board approved plans to separate its cash solutions business. The British security contractor says it received unsolicited expressions of interest from third parties.
WPP's WPP.L better-than-expected organic sales performance in the second quarter is seen driving the world's biggest advertising company's shares 2-3% higher.
In further evidence of the service-based economy doing much better than industrials, German IT systems provider Bechtle BC8G.DE beat Q2 expectations with shares seen rising 5% pre-market.
Meanwhile, car parts maker Hella HLE.DE reported fourth-quarter results in-line with pre-released numbers but Jefferies analyst points to weak auto margins.
Drugmaker Novo Nordisk lifts sales outlook on new diabetes, obesity treatments loses more customers in Britain of Italy's UniCredit Fabrizio Saccomanni dies suddenly at 76 Says Wins 246 Gross Aircraft Orders In Jan-July posts better than expected second quarter performance firm G4S to separate cash solutions business finance chief to step down next year, taps Greve to take over Hill profit hit by regulatory cap, U.S. expansion costs Tagrisso helps lung cancer patients live longer -study
UNEASY EASE IN EUROPE (0542 GMT)
After yesterday's exuberance which saw the pan European STOXX 600 .STOXX stage one of its biggest daily gains this year and without any immediate sign that the tit-for-tat spat between Beijing and Washington isn't escalating (for now), European stock markets are expected to hit pause again.
How long that lasts is not clear as attention turns from the other side of the pond to Italy after the leader of Italy's ruling League party, deputy prime Minister Matteo Salvini, declared the governing coalition unworkable late last night after months of internal bickering and said the only way forward was to hold fresh elections. are also still cautious after the tumultuous week since U.S. President Trump announced plans for further tariffs on Chinese goods and Beijing retaliated by devaluing the yuan and the benchmark is set for its second weekly drop.
Also weighing on risk appetite is a report that Washington is delaying a decision about licenses for U.S. firms to restart trade with Huawei Technologies HWT.UL .
Still for now markets appear to have stabilised overnight. IG financial spreadbetters expect London's FTSE to open 20 points lower at 7,266, Frankfurt's DAX to open 44 points lower at 11,801, and Paris' CAC to open 26 points lower at 5,362.
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