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* European shares slide on Italy budget woes * Italy government hikes deficit target * Italian banks down 7.3 pct, stay above August lows * U.S. stocks manage a reversal, up 0.1 pct Sept 28 (Reuters) - Welcome to the home for real-time coverage of European equity marketsbrought to you by Reuters stocks reporters and anchored today by Danilo Masoni. Reach him onMessenger to share your thoughts on market moves: danilo.masoni.thomsonreuters.com@reuters.net CLOSING SNAPSHOT: DIRE DAY FOR ITALIAN ASSETS (1541 GMT) It's been a pretty awful day for Italian markets with bonds and stocks selling off violentlyand dragging the rest of Europe down with them. The government's plan for a budget deficit at 2.4 percent of GDP for 2019 and beyond defiesBrussels and triggered government bonds to sink and Italian banks and stocks to suffer theirbiggest one-day losses since the Brexit vote - down 7.3% and 3.7%. Euro zone stocks fell 1.3 percent and euro zone banks fell 3.8 percent as the Italian budgetreignited fears of cracks appearing in the European project. It's also the end of the quarter and the pan-European STOXX has managed just a 1 percentgain over the third quarter - reflecting the volatility that's plagued the region, and the flowsleaving Europe in favour of the U.S.. (Helen Reid) ***** IS ITALY EXPOSING WHY WALL STREET OUTPERFORMS EUROPE? (1257 GMT) Asked to explain the underperformance of European stock markets this year, analysts oftenname Brexit or Italy as examples of political risk which put foreign investors off. "This makes Italian debt much more vulnerable to external risks", Oxford economics analystssay about a debt pile already worth 130 percent of GDP. But it's not only about debt, growth (or lack of it) across Europe matters too. For Chris Iggo, CIO fixed income at Axa Investment Managers, "growth has disappointed andmany countries have fiscal situations that are almost as vulnerable as they were in 2012". Not only Iggo believes that "the U.S. will continue to outperform" in the current economicenvironment, but he also thinks Europe is actually likely to suffer even more than the U.S. fromany American slowdown. "Unless there is a wave of structural reform or further integration, or a productivitymiracle, the euro area is extremely vulnerable to a slowdown in the US economy". Bonus: three graphics to illustrate Italy's fiscal situation: Italy's budget deficit set to test EU rules? https://reut.rs/2n8vpCq Where next for Italy's debt levels? https://reut.rs/2KmGDwe Italian banks left exposed to any sovereign bond shock https://reut.rs/2n7m0uV Also, as noted by our Milan bureau, today is Italy's Economy Minister Giovanni Tria'sbirthday. Seems markets are celebrating in style. https://en.wikipedia.org/wiki/Giovanni_Tria (Julien Ponthus, Ritvik Carvalho and Danilo Masoni) ***** WALL STREET WAKES UP, ITALY PLUNGES TO NEW LOWS (1200 GMT) It looks that American investors may be adding some extra pressure to Italian assets. Italy's FTSE MIB index has just hit a fresh day low, down 4.5 percent, while Italian banksare plunging more than 8 percent at the moment. "The last leg lower has come as we got closer to the start in the Unite States," saysGiuseppe Sersale, fund manager and strategist at Anthilia Capital in Milan. "I'm not completely sure if it's the Americans who're selling but certainly we're makinganother leg lower on a fall that was already quite significant," he adds. Here's were we stand in Europe at the moment. Meanwhile in the US, Wall Street looked set for a weaker open as the Italian budget woesweighed. (Danilo Masoni) ***** VALUE STOCKS: IT'S THE DEMOGRAPHICS, STUPID (1104 GMT) Value stocks face a grim future and that's because of slowing demographics, a Berenbergresearch note argues. "We believe that lower-for-longer interest rates and weaker economic growth, resulting fromthe ageing of the population, will sustain an across-the-cycle re-rating of equities overall andof more expensive equities versus cheaper ones in particular," the analysts write. And here's the key takeaway: "For value stocks, this implies a continued underperformanceversus growth stocks". (Julien Ponthus) ***** A BUBBLY INDICATOR, DOT-COM STYLE (0951 GMT) The MacroTourist newsletter has an interesting chart looking at how many companies in theRussell 3000 are now trading above 10 times sales, a level associated with the excesses of the2000 tech bubble. "According to this metric, we are only a few ticks away from equaling 'DotCon' stupidity,"says Kevin Muir, market strategist at East West Investment Management. See for yourself: (Julien Ponthus) ***** ITALY, FOCUS NOW TURNS TO THE RATING AGENCIES (0844 GMT) There's no meltdown for Italian assets as the 2.4 percent deficit figure is far from beingthe worst case scenario, although it has come at the higher end of expectations. Italian banks are falling a heavy 5 percent, on track for their biggest one-dayloss in more than 2 years, but remain above the lows hit in August when there were concerns thedeficit could shoot up to 3 percent. Markets are now focusing on what the rating agencies will say about the government's budgetdeal. Will they downgrade Italy? And what will that mean for banks' capital adequacy ratios? "All the attention will now shift to rating agencies which were waiting for the budget toreconsider their scorings," says Gilles Guibout, portfolio manager at AXA IM in Paris. And here's another comment from analysts at Credit Suisse led by Carlo Tommaselli. "A potential downgrade of the country rating could pose risks to the sovereign investmentgrade and additional potential charges to (banks') CET1 ratios which nevertheless would bemitigated by the internal models which most of the Italian banks adopt," they say. (Danilo Masoni) ***** MORNING SNAPSHOT: ITALIAN DEFICIT WEIGHS ON MILAN (0717 GMT) The pan-European STOXX 600 is keeping its cool, down a moderate 0.35 percent but thesame can't be said in Italy. It took a few minutes before we got a clear picture of how much damage the Italian deficitwould be doing this morning. The losses in Milan looked limited until banking shares started to trade and pulled the bluechip index down, now on a 2 percent fall. The banking index is retreating 4.5 percent. Here's how things played out in the first few minutes of the session on the Italian stockmarket: (Julien Ponthus) ***** WHAT WE'RE WATCHING AHEAD OF THE OPEN (0650 GMT) European shares are seen opening slightly lower with Italian stocks set to underperformafter the Italian government raised its deficit target to 2.4 percent, at the top end of marketexpectations. The figure is still below the 3 percent feared a few weeks ago, although investors may reactnegatively to Finance Minister Tria apparently losing out against M5S and Lega. Futures on main euro zone benchmarks were trading down 0.4 percent, while FTSE futures weredown 0.1 percent. The STOXX 600 was likely to end the week below the one-month high hit in theprevious session but may still post a small weekly gain, its third in a row. A fall in Italian government bonds following the budget decision could put pressure onshares in Italian banks, which have big sovereign bond holdings. Airlines, which have come under pressure due to the recent surge in crude oil prices, willbe in focus with easyJet saying its annual profit would come in at the upper end of a guidedrange, and Ryanair facing another staff strike that will disrupt the plans of more than 40,000travellers. Other headlines movers: BASF's Wintershall and DEA to create independent oil and gasbusiness; M&C Hotels CEO to step down after just five months; Insurer RSA says poor UKunderwriting results hit Q3; Britain's United Utilities sees higher first-half profit, revenue (Danilo Masoni) ***** FUTURES DIP AS ITALIAN DEFICIT DENTS SENTIMENT (0625 GMT) European futures are now trading and they are doing so unequivocally in the red as theItalian government's decision to run a 2.4 percent deficit has set a likely collision coursewith the European Commission and possibly with some foreign investors. The retreat is however limited as, like in many stories, there's quite a lot of room forthing to get much worse. "2.4 pct is probably not scary enough to trigger an immediate full-blown Italian crisis",Berenberg commented. "Italy may well suffer a genuine debt crisis once the next recession (due perhaps in 2021)has exposed the underlying weaknesses of Italy while reducing investor appetite for risk at thesame time". (Julien Ponthus) ***** EARLY MORNING HEADLINES ROUND-UP (0609 GMT) K+S flags 80 mln eur hit on Q3 profit due to drought Netflix to double investments in France, produce more local shows Ryanair strikes set to hit over 40,000 passengers across Europe Freeport, Rio sell majority stake in Grasberg mine to Indonesia SIG Combibloc prices Swiss IPO at 11.25 Swiss francs/share Congo state miner warns Randgold on transfer of Kibali mine to Barrick Swiss group GAM revamps management after share skid Novartis strikes deal with Chinese firm to make Kymriah Shell's Norco hydrocracker restarts; catcracker shut -sources Rolls-Royce still grappling with Trent 1000 engine issues Total Port Arthur refinery small crude unit shut -sources Volvo aims to sell electric trucks in North America by 2020 (Danilo Masoni) ***** MORNING CALL: EUROPE SEEN FLAT AFTER ITALY SETS DEFICIT TARGET (0529 GMT) European shares are expected to open little changed this morning after Italy's governmentraised the budget deficit target at 2.4 percent of GDP for the next three years, defyingBrussels and marking a victory for party chiefs over economy minister. Financial spreadbetters expect London's FTSE to open 8 points higher at 7,553, Frankfurt'sDAX to open 3 points lower at 12,433 and Paris' CAC to open 10 points lower at 5,530, while theeuro was trading little changed. "The euro is remaining resilient in early trade. This means the markets are seeing this as adomestic issue right now, rather than something that is an immediate risk to the eurozoneregion. There is still scope for political jitters to hit sentiment for the euro as the dayprogresses," said Jasper Lawler, Head of Research at London Capital Group. Over in Asia, Japan's Nikkei hit a 27-year high, taking heart from a boost for the dollarafter the Federal Reserve chairman said he did not expect a near-term recession, and stronggains on Wall Street overnight. (Danilo Masoni) *****