LIVE MARKETS-Brexit: at least one more year of pain?

* European stocks slide as U.S.-Iran tensions rise
* STOXX 600 down 1.2%, DAX -1.7%
* Airlines continue to slide on rising crude oil prices
* Risk-off: banks, chemicals, miners top fallers

Welcome to the home for real-time coverage of European equity markets brought to you by Reuters
stocks reporters and anchored today by Joice Alves. Reach her on Messenger to share your
thoughts on market moves: joice.alves.thomsonreuters.com@reuters.net

BREXIT: AT LEAST ONE MORE YEAR OF PAIN? (1030 GMT)
Yes, it's going to be one more (at least) year of Brexit madness as the UK and EU negotiate
trade terms of the divorce.
Though the chances of a full-fledged trade agreement by 2020 does look slim, ING says most
trade experts reckon it would theoretically be possible to agree a basic, tariff-free agreement
covering goods trade this year.
The bank gently reminds the EU-Canada deal, which took seven years from start to finish. ING
believes if the transition period is not extended by June, then the race to get the FTA done by
2020 is uncertain.
And a failure would mean an abrupt exit from the single market and customs union for British
firms. That's another reason why ING isn't expecting a big rise in UK investment this year.
Even if the deal is struck, ING warns that a "free-trade agreement (FTA) does not
mean frictionless trade" as it would mean plenty of costs and bureaucracy.
"To qualify for zero-tariffs, UK firms selling goods to Europe will likely have to prove
that their products are sufficiently British-made. For goods that have come through a complex
supply chain, documenting the origin of a product’s value is not always easy – and often it is
simpler and cheaper to pay the tariff than it is to try and document origin," ING explains.
"Whatever happens, one thing looks fairly clear: we aren’t going to know the answer to many
of these key questions until much later in 2020."
Uncertainty over the outcome of UK-EU trade negotiations is reflected in implied volatility
gauges in sterling (chart below) which are far more elevated than for other major currencies.



(Thyagaraju Adinarayan)
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OPENING SNAPSHOT: BOURSES EXTEND LOSSES (0900 GMT)
European bourses opened in negative territory this morning as investors chase safe-haven
assets after tensions between the U.S. and Iran exacerbated.
The pan-European index is down 1.3%, on track for its worst day in over a month
with cyclical sectors, banking and chemical, leading the losses.
Hikma Pharmaceuticals and Covestro shares are down more than 5%.
Britain's blue-chip index is down 0.8%. Morrison shares slide 3.7% after and
BofA downgrade and German rival Aldi reported strong sales in the UK.
Here is your snapshot of European bourses almost one hour from the open.
(Joice Alves)
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ON OUR RADAR: ATLANTIA AND RETAILERS (0757 GMT)
Futures point to a lower open in Europe this morning as investors are betting on safer
assets such as gold amid escalating Middle East tensions.
In Italy, shares of Atlantia are under pressure after the CEO of the company's unit
Autostrade told a local paper that the unit risks going bankrupt if Italy's government revokes
its motorway licence with limited compensation.
It is a public holiday in Milan but the stock exchange will be trading regular hours.
Christmas festivities gave a boost to the British arm of Aldi , with total sales
rising 7.9% in the four weeks to Dec. 24 year-on-year, driven by strong growth in beers, wines
and spirits as well as its premium ranges.
Good news also for German retailers as sales across the country was up 2.1% m/m and +2.8%
y/y in November, Germany statistics office said today.
In terms of macro news, UK, Spain, France, Germany and Italy are releasing PMI data this
morning.
On the M&A front, Covivio Hotels signed an agreement to acquire a portfolio of eight hotels
located in Rome, Florence, Venice, as well as in Nice, Prague and Budapest for €573 million
including capex..

Other corporate headlines this morning:
S.Korean restaurant owners voice concerns over $4 bln Delivery Hero deal
Ternienergia Signs Preliminary Contract With Buttol Srl For Sale Of Biodigestion &Biomethane
Production Plant

(Joice Alves)
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EPIPHANY CELEBRATIONS HIT BY MIDDLE EAST TENSIONS (0650 GMT)
European bourses are seen opening lower this morning as the escalating U.S.-Iran tensions
are prompting investors to bet on safe assets.
Gold surged close to a seven-year peak today, as investors flocked to the safe-haven metal,
while palladium surpassed the level of $2,000 to hit a record high.
Helsinki and Warsaw stock exchanges will be shut today for the Epiphany holiday. In Milan
and Madrid, the public holiday won't affect trading hours.
Financial spreadbetters at IG expect London's FTSE to open 42 points lower at 7,580,
Frankfurt's DAX to open 124 points lower at 13,095, and Paris' CAC to open 59 points lower at
5,985.

(Joice Alves)
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(Reporting by Danilo Masoni, Joice Alves, Julien Ponthus and Thyagaraju Adinarayan)