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* European shares dip * Tech pulls back after SAP results * Focus on earnings * FTSE buoyed by softer pound LONDON, July 19 (Reuters) - Welcome to the home for real-time coverage of European equitymarkets brought to you by Reuters stocks reporters and anchored today by Helen Reid. Reach heron Messenger to share your thoughts on market moves: helen.reid.thomsonreuters.com@reuters.net THE PROBLEM WITH FOLLOWING THE BENCHMARK (1400 GMT) So far this year the performance between U.S. and European stocks has diverged somewhat, beit on earnings growth expectations or the uncertainty created by a trade war. Some investors, though, are concerned about the big role tech has had to play in the U.S.equity rally. Akbar Ali, portfolio strategist, Active Quantitative Equity at SSGA, says there'sroom for significant downside for the tech sector in the U.S. if EPS forecasts or guidancedisappoint. In Europe, Ali favours a defensive approach (health care, industrials and financials), andsees many opportunities in small caps. "If we ... have a Q2 earnings surprise on the upside, then you participate in an equityrally, but if there is any hindrance, companies don't deliver, key barometers are not met -watch out below. You want to be in a defensive portfolio," says SSGA's Ali. Christophe Roehri, global head of business development at TOBAM, points to a sharp bias ofthe benchmark towards the largest market cap, both in the U.S. and elsewhere, following theoutperformance of the mega cap stocks. He adds that while correlations between the 10 largest market cap stocks is increasing,overall market correlations are coming down. "This is in fact something that is quite unique, and this is something that could beworrisome if you want to make sure that your portfolio is well-diversified," says TOBAM'sRoehri. (Kit Rees) ***** BRACING FOR AUGUST VOLATILITY (1321 GMT) With a wealth of geopolitical risks building, many investors are hunkering down and tryingto protect their portfolio ahead of a potentially volatile late summer. "We think volatility's going to be heightened. Bad things tend to happen during the month ofAugust with less liquidity," says Christopher Peel, chief investment officer at TavistockWealth, who's cut his risk weighting to prepare. While Peel remains positive on stocks - he says earnings, particularly in the U.S., arestill "firing on all cylinders" - he's taken his equity weighting down slightly as a result. Last August tensions on the North Korean peninsula drove some sharp swings in equitymarkets. This time round it's likely to be news on trade tariffs that will trigger volatility. Below you can see how both stock and bond volatilities have come down from their spike inFebruary, though the VIX remains at a higher level than throughout most of 2017. (Helen Reid) ***** INVESTORS SEEK SHELTER IN SPAIN (1146 GMT) It's not just for its beaches that investors are going to Spain this summer, but also for ahaven of growth in an increasingly uncertain environment. UBS adds a long recommendation on the IBEX, saying "economic, fundamental and macrovariables are all positive into H2." "EPS revisions have been modest but IBEX valuation remains near a 5-year low and highsensitivity to a weaker USD should be supportive based on our FX outlook," UBS analysts write intheir second-half playbook. Their positive stance on European banks also ties in to the IBEX call, as a third of theSpanish index is bank stocks. Next week Santander, Bankia, Bankinterreport on Thursday and Sabadell, BBVA, Caixabank on Friday. "Risk remains due to high correlation to Italy stocks over the past 6 months, but we seerisk/reward skewed positively," UBS adds. As you can see below, Spanish stocks are starting to gain back ground relative to Italyafter nearly 15 months of underperformance. (Helen Reid) ***** CAR TARIFFS: WHAT'S THE DAMAGE? (1058 GMT) Cars are front and centre of the trade war, and U.S. car tariff plans are what Berenbergeconomist Holger Schmieding calls a key litmus test for the market's overall theory that Trumpwill not follow up on his biggest trade threats. As the U.S. Department of Commerce prepares to host a public hearing on car and partsimports today, Schmieding writes: "We assume for our base case that Trump would use the threatas a bargaining chip but will not actually implement the levies." If tariffs on the $62 billion annual car imports from the EU do go ahead, it would trigger atransatlantic trade war with retaliation likely. Teasing out the potential impact isn't easy. "We think U.S. auto tariffs are now increasingly likely, yet understanding this risk ischallenging given uncertainties around the size of tariffs & impacted/exempt countries," writeUBS analysts. UBS' base case scenario assumes a 3.7 percent cost increase while their worst case is for a12.4 percent increase. As you can see below, the cost will diverge for auto manufacturers moreor less dependent on U.S. imports. While German carmakers are likely to be the worst hit by tariffs, UBS reckons they mayactually be able to pass more of the costs on to consumers as they primarily import premiumvehicles to the United States. (Helen Reid) ***** "WALL OF FREE CASH FLOW AROUND THE CORNER" (1015 GMT) The earnings season is underway and investors looking for fat pay-outs may well consider theenergy sector, which has struggled a bit as of late due to a pullback in oil prices but is inhealthy shape after recent years' restructuring efforts. Thomas Adolff, analyst at Credit Suisse, sees a "wall of cash flow around the corner" andsays now that the big European oil majors have successfully repaired their businesses, the keyissue is what to do with the extra money. Most oil companies break even at around $50 dollars per barrel, he notes, and even after therecent decline, Brent crude prices remain well above $70. "Today, it is less about cash flow break-evens but instead more about what to do with thesurplus in a world where the market is demanding discipline," he says. "We believe that the EuroMajors will mostly stick to their capital frameworks in the next few years, likely with enhanceddistribution policies." Shares in Royal Dutch Shell, BP, Total and Eni have risenbetween 9 and 16 percent so far this year as analysts have kept revising their earningsestimates for the sector upwards. (Danilo Masoni) ***** ARE MARKETS WORRIED ENOUGH? (0943 GMT) There's a lot going on at the moment with trade and geopolitics, and Hermes InvestmentManagement's CEO Saker Nusseibeh says that the one thing worrying him is that markets don't seemto be as worried as he is. "Investors are not preparing for the possibility that things could go really wrong. They areconfident the signs of the last crisis aren’t appearing so are underestimating the risks,thinking it will all turn out fine," writes Hermes' Nusseibeh, adding that long-term investorsshould actually be getting ready to buy if and when the crunch does happen. He cites three reasons behind his misgivings. Firstly, he sees a risk that trade spatbetween the U.S. and China could escalate (even if unintentionally), which wouldn't exactly begreat if we also get a recession give the yield curve is flattening. Secondly, the bull run is getting "pretty long in the tooth" with the market reluctant tolet go and admit that it must end sometime. And thirdly, Nusseibeh is concerned that theindustry has simply lost the ability to navigate divergent economic environments and politicalrisks, instead of simply betting on whether an economy is growing or not. "I worry the asset management business no longer has the skill-set in house to trulyunderstand the political machinations of various governments and states or how they mightinteract within the context of a multi speed global economy and work it all out," saysNusseibeh. (Kit Rees) ***** OPENING SNAPSHOT: EUROPEAN SHARES STRUGGLE FOR DIRECTION (0733 GMT) European shares are off to a rather directionless start today with country indexes movingbetween a fall of 0.3 percent for Germany's DAX and a rise of 0.3 percent for Italy's FTSE MIB. At the sector level, it's worth noting the pull-back in tech stocks on the back of a fall inGerman software maker SAP following its earnings update. Here's your snapshot: (Danilo Masoni) ***** WHAT'S ON THE RADAR FOR THE EUROPEAN OPEN (0647 GMT) European stocks are set to falter at the open as investors lock in profits after a rallytook benchmarks to one-month highs yesterday. Earnings season is in full swing with several heavyweights in consumer goods and industrialsreporting. Disappointment from consumer giant Unilever could weigh on the sector. The Anglo-Dutch makerof ice cream to soap blamed a Brazilian transport strike and weak pricing for its lower thanexpected second-quarter sales growth. Weak pricing was one of investors’ main concerns for theconsumer staples stocks last quarter, too, causing some sharp stock falls. Industrials reported strong results overall, with Swiss engineering company ABB beatingprofit forecasts though its sales were weaker and it warned about rising geopoliticaluncertainties. Truckmaker Volvo’s profit also topped forecasts, perhaps providing a sentimentboost to the autos sector hit by tariff fears. France’s Alstom and Sweden’s SKF also reportedstrong results. And tech stocks, which led gains on Thursday, could extend their rally after Europe’sbiggest tech company, SAP, raised its outlook on forecast-beating results thanks to growth inits cloud business. Nordea, the Nordic region’s biggest bank is indicated up 1 percent after its second quarterprofit topped forecasts, though it said revenues were unlikely to reach last year’s level in2018. And UK engineer Babcock lowered its full-year revenue outlook; its shares areseen down 5 to 10 percent at the open. (Helen Reid) ***** FUTURES POINT TO LACKLUSTRE OPEN (0613 GMT) European benchmark futures are trading down 0.1 to 0.2 percent across the board, indicatingthe recent rally will peter out today as investors take profits. It's a heavy day for earnings meaning results will likely drive more movement underneathindex levels. Adding to the list of earnings out so far, consumer goods giant Unilever has just reportedlower than expected second-quarter sales, hurt by a Brazilian transport strike and weak pricing. The latest headlines: Unilever second-quarter sales disappoint Sweden's SKF Q2 profit beats forecast, sees higher demand in Q3 French group Alstom posts higher Q1 sales Roche Tecentriq cocktail cut lung cancer risk, survival data still to come (Helen Reid) ***** EARLY MORNING EARNINGS ROUND-UP (0539 GMT) Trade war risks and currency risks are the main issues flagged by companies reporting todaythus far. Swiss industrials giant ABB warns geopolitical risks are rising, while unlisted VolvoCars said it was on track for another sales record despite trade tensions - perhaps a positivesign for the autos sector. Here's your results round-up: Publicis stumbles on health unit underperformance in 2nd quarter ABB warns on rising geopolitical risks after Q2 profits beat forecasts SAP raises outlook as cloud growth "unleashed" Volvo Cars targets sales record, facing down trade worries Innogy agrees with E.ON and RWE on planned transaction Nordea Q2 profit narrowly tops forecast Givaudan profit falls as currency losses in Argentina bite Essity Q2 core profit slides as higher pulp prices weigh (Helen Reid) ***** MORNING CALL: EUROPEAN RALLY TO STALL (0531 GMT) European shares are set to take a breather this morning after earnings optimism tookregional benchmarks to a one-month high on Wednesday. Asian shares extended early gains overnight as upbeat Wall Street earnings buoyed globalinvestor sentiment, although trade war jitters pushed China's yuan to fresh one-year lows inboth the onshore and offshore markets. On the radar today are updates from ABB, Alstom, Anglo American, Kone, Kuehne & Nagel,Publicis, Unilever, Volvo, among other big European companies. Spreadbetters CMC Markets expect the FTSE 100 to open unchanged at 7,676 points, the DAX toopen 17 points lower at 12,748 and the CAC 40 10 points lower at 5,437. (Helen Reid) ***** (Reporting by Helen Reid, Danilo Masoni, Julien Ponthus and Kit Rees)