LIVE MARKETS-When tech meets big oil

LONDON, March 28 (Reuters) - Welcome to the home for real-time coverage of European equitymarkets brought to you by Reuters stocks reporters and anchored today by Danilo Masoni. Reachhim on Messenger to share your thoughts on market moves:danilo.masoni.thomsonreuters.com@reuters.net WHEN TECH MEETS BIG OIL (1526 GMT) The rise of digital is going to impact pretty much every sector, and oil & gas is noexception. In fact, Morgan Stanley's analysts see the potential for a "new golden decade" forthe majors thanks to digitalisation driving improvements in efficiency. They estimate that every 10 percent improvement in operating costs would improve free cashflow and dividend cover by 14 percent for the European oil majors in aggregate. Morgan Stanley's analysts compare this to the European oil majors' 'Golden Decade' in1987-98 which saw them outperform the European market by 50 percent. "Ongoing digital driven cost efficiencies will likely materially impact cash generation,which supports our positive view on Big Oil and we would play through Overweight-rated RD Shelland Total," they say. They single out a number of areas which could benefit from leveraging tech, such as costsimprovements in drilling, reduction in maintenance costs and increasing reservoir recovery. So watch this space (for a while anyway)... (Kit Rees) ***** WHEN IS THE OPTIMAL TIME TO BUY? "WAIT FOR APRIL AND MAY" (1355 GMT) Christopher Potts, Head of Economics & Strategy research at Kepler Cheuvreux, believesinvestors need to wait for the final stages of this correction to play out in the weeks of Apriland May if they want to increase their chances of getting better returns. "Equity markets should attempt a recovery here but we consider that it is too early for itto be sustained," he writes in a strategy note this week to clients. "We are still not witnessing a major transfer of investment funds into markets of securedebt, into Treasuries above all. Nor is the corresponding rotation into higher quality,defensive equity compartments yet substantial. This correction will be at its end when we seethis kind of reallocation of funds," he argues. Potts says the downside risk he sees attached to most major equity markets is of around 5%,although he warns this correction could be more "disturbed and erratic" than the typical one. "In the final stage of a significant market correction of this variety it is usually thecase that investor anxiety is created by erratic price behaviour at the frontier of thecorrection zone. This frontier is what separates a market correction of the 10-15% category fromsomething that is more nasty," he says. For the U.S. S&P 500 benchmark index Potts has set the frontier zone at 2,500 points, whilefor the Euro STOXX 50 it is within the 3100-3200 area. Stay alert! (Danilo Masoni) ***** WHY HAS THE SELL-OFF BEEN CONTAINED TO EQUITIES? (1246 GMT) Stocks have been the primary target of selling recently, similarly to the early Februarydrawdown, with volatility also mostly affecting equities rather than other asset classes. "It is again remarkable that this correction appears to be almost completely an equityaffair, with limited impact in credits, high yields, currencies and EM debt," notes LukasDaalder, CIO at Robeco. There are two ways of explaining this, he argues: "Either you are an optimist, stating that the stock market is overreacting, with all othermarkets still pretty positive, or you are a pessimist, stating that first the most liquid assetshave been sold, which means that if the selling pressure continues, the other assets are boundto follow." Looks like, for today at least, that selling pressure is easing somewhat. (Helen Reid) ***** AN EYE ON IT SECURITY STOCKS (1217 GMT) There has been a lot of focus on U.S. tech firms and how they use data from social mediausers, especially as the EU's General Data Protection Regulation (GDPR) is set to come intoforce in less than a month. Worries have played out in share prices, with Facebook down nearly 18 percent overthe past seven sessions since the data misuse scandal came to light. We have been on the outlook for any fallout, both positive and negative, on Europe's techsector, a large part of which is made up of components and software makers. One stock which hasbeen drawing attention is IT security provider Sophos, down around 20 percent so farthis year. So it's interesting that analysts at brokerage Stifel say they are "relaxed" with their"buy" recommendation on Sophos, citing specifically "Facebook foibles" helping drive Sophos' Q4trading. "GDPR is currently generating sales momentum as the Facebook debacle reignites uncertaintyof what constitutes 'personal data'," write Stifel's analysts, adding that they think Sophos'year-end is looking like it will be "in line". "We sense that GDPR coupled with the new products may create a degree of 'pull-forward'effect," Stifel analysts say. Though we should mention that Northern Trust Capital Markets' analysts initiated a "tradingsell" on Sophos last week, citing high leverage and its acquisitive strategy. (Kit Rees) ***** MIDDAY SNAPSHOT: RISK OFF, RISK ON... (1202 GMT) After a broad sell-off at the open it looks like investor appetite for risk has returnedsomewhat: the STOXX 600 is down only 0.4 percent - having lost as much as 1.3 percent at itsdaily low, while futures in the U.S. point to a mild bounce, and in the UK the FTSE has poppedup into positive ground. The move up from lows is due mostly to a rush into defensive plays such as utilities, whilethe pharma sector is getting a big lift after Japan's largest drugmaker Takeda said it wasconsidering a bid for Shire, sending shares in the London-listed firm soaring as much as 25percent. Here's your snapshot: (Danilo Masoni) ***** ARTICLE 50 ONE YEAR ON: UK MARKET HEALTH CHECK-UP (1148 GMT) Tomorrow marks a year since the UK government triggered Article 50, thus setting in motionarduous negotiations ahead of Britain's exit from the European Union. In the 15 months since the Brexit vote, UK equities have suffered significant outflows asdomestic and international investors alike shunned the market and shifted their cash elsewhere,fearing the consequences of the divorce and noting a deteriorating economic environment. Here are some figures on the UK market since June 23 2016, courtesy of Hargreaves Lansdownanalysts: - UK equity funds have seen outflows of 6.7 billion pounds, compared to 8.2 bln into globalequity funds and 19.3 bln into fixed income funds - General retailers listed in the UK have lost around 10.5 billion pounds in marketcapitalisation - Carpetright, Mothercare, and Debenhams have been the worst hit - Small-caps have been the best-performing part of the market - Returns from the FTSE all-share have been far smaller than other benchmarks' in sterlingterms, partly due to the currency's devaluation (see chart below) - But even in local currency the returns have been relatively weak Rowan Dartington technical analyst Guy Stephens reckons UK stocks could catch up, though:"Given the meteoric rise of some overseas markets coupled with trade war uncertainty, it couldbe cause to reconsider the UK as a worthwhile investment opportunity." You can read our story on the investors daring to buy into UK retail here: (Helen Reid) ***** "TRUMP IS A STOCKS GUY" (1110 GMT) President Donald Trump has been dubbed the "U.S. stock market cheerleader-in-chief" for hisenthusiastic tweets celebrating the rise of Wall Street indexes under his tenure. He has been less vocal since the February correction. Some commentators say Trump wants toavoid any blame for the recent market declines, especially those linked to his policies or theU.S. trade spat with China. Rabobank market economist Stefan Koopman noted this tweet last Monday: "He stopped tweeting about the stock market right when #MAGA! ("Make American Great Again")conflicted with the market’s perception of what’s actually great, but Monday’s rally did prompta modest 'Great news!' tweet", Koopman noted in his daily market commentary. Koopman said "Trump is a stocks guy" who cares about the Dow and the S&P and he "might getcold feet" if his agenda triggers a long-term sell-off. "Admittedly, it's highly speculative or possibly wishful thinking, but the armchairpsychologist in me says that the explicit and volatile moves in equities might just be enough toconvince Trump to keep his composure in the negotiations with China, even as North Korea is nowgetting into the mix again." Here's a nice chart designed by Reuters' Ritvik Carvalho last week showing the frequency ofTrump's tweets touting the stock market upswing and the radio silence which followed theFebruary correction. You can read his story here: (Julien Ponthus) ***** POSITIVE THINKING: BATTERED EUROPEAN SHARES NOW "VERY ATTRACTIVE" (1001 GMT) Always look on the bright side of life! Sure, European shares are down over 6 percent sincethe beginning of the year but that makes some of them look like a bargain for investorsdetermined to invest in the stock market despite the current turbulence. "Post the recent moves, Europe's absolute valuations are looking very attractive", reckonsMorgan Stanley in a strategy note this morning. The broker notes that stocks on the old continent have hit a number of thresholds whichcould make them look cheap in the eyes of stock pickers looking to "buy the dip". Among European shares, Morgan Stanley is looking for opportunities among defensive stocksand in particular, those which have seen analysts positively revise their earnings per share.The broker identified Ipsen, Novartis, Anheuser-Busch Inbev and Enel in this group. Stocks with strong balance sheets and high dividend yields are also seen as a good option. Afew examples? Among financials, MS likes Aviva, Caixabank, Danske Bank or BNP Paribas, Orange orDeutsche Telekom for telecoms and Enel and Total for energy. It's also worth "screening for cheap UK stocks with high global exposure", strategists add,naming among other stocks British American Tobacco, Shire or Randgold. Here's a chart showing how European shares are valued under their long-term average: (Thyagaraju Adinarayan and Julien Ponthus) ***** EUROPEAN CHIPMAKERS HIT BY SELF-DRIVING CAR WORRIES (0834 GMT) Top fallers among European tech stocks are chipmakers, from ams to STMicroand Infineon, all down between 4 and 9 percent. For IG analyst Alexandre Baradezthat's ultimately linked to growing worries over self-driving cars. "As concerns semiconductors, the fear comes from the environment of bad news that isaccumulating around the functioning and testing of autonomous vehicles, with a particular focuson the bad news on Tesla: investigation by the NTSB of the crash and the delay in deliveries ofvehicles and the recent downgrade note from Moody's," he says. More broadly on tech, Baradez also raises the issue of stretched valuations. "The market is realizing that a stock like Facebook can lose more than 20 percent in a fewdays, which throws up questions over the valuation of other big tech names and their sensitivityto a potential scandal," he says. On a price to earnings basis, both European and U.S. technology stocks are valued aroundtheir highest level in more than a decade, as you can see in this chart. (Tom Pfeiffer and Danilo Masoni) ***** OPENING SNAPSHOT: EUROPE PAINTED RED (0744 GMT) European shares have opened down sharply with tech stocks feeling the heat of a sell-offovernight in their U.S. peers. Although there is no scarcity of negative headlines to explainthe declines in the sector, for UniCredit it's ultimately a matter of high valuations. "A recent stream of negative news has acted as a trigger for the sell-off in the U.S. techsector. But the underlying cause ... is extremely stretched valuation metrics that havegenerated a sizeable misalignment with fundamentals, mostly for the big technology stocks," saidUniCredit analysts in a note. "It should not come as a surprise that some negative news wouldprecipitate a sell-off." Here's your opening snapshot: (Danilo Masoni) ***** US TECH SELL-OFF SENDS EUROPE'S STOCK FUTURES DOWN 1 PCT (0605 GMT) It looks that European shares are going to give up most of the gains seen yesterday afterfresh selling pressure hit U.S. tech stocks overnight, offsetting ebbing trade war fears. Futures on main regional stock benchmarks were trading down around 1 percent. (Danilo Masoni) ***** EARLY MORNING HEADLINE ROUND-UP (0555 GMT) Nestle, other food groups likely suitors for GSK's Horlicks - sources Ex-Deutsche Telekom boss favourite to be next Airbus chairman-report British VW drivers start "dieselgate" claim in High Court EU regulators look at Volkswagen's Luxembourg tax deals -Bloomberg Telecom Italia notifies watchdog on network separation Italy's watchdog looking into Telecom Italia board resignations -sources Sky's Italy unit close to broadband deal with Open Fiber - sources Louis Vuitton expands French manufacturing to meet handbag demand Ryanair's Portugal cabin crews to go ahead with Easter strikes Casino says sale process of Via Varejo unit continuing Unions at VW's Skoda Auto say latest wage proposal by carmaker not satisfactory Norsk Hydro to start shutdown of half Alunorte capacity by mid-April -sources UK's Capita to set out new strategy, rights issue on April 26 - source MEDIA-HSBC froze account linked to alleged $500 million Angolan fraud - FT Data, mobile money main revenue drivers for Orange in Africa UAE healthcare provider NMC raises $2 billion loan - sources Eni sees no problems in Russian gas supply to Italy from political tensions Metro says to seek new approach to wage deal blockage at Real Sainsbury's needs year's notice to act on post-Brexit trade deal Repsol, Premier win oil block in last Mexico auction before election (Danilo Masoni) ***** MORNING CALL: EUROPE SEEN LOWER AGAIN (0522 GMT) European shares are expected to open lower today following a late reversal on Wall Streetovernight when tech stocks came under renewed selling pressure, led lower by shares includingFacebook and Alphabet, while Twitter tumbled after short-seller Citron Research called the stock"most vulnerable" to privacy regulations. While shares fell in Asia too, here are your opening calls for Europe, courtesy of CMCMarkets: FTSE100 is expected to open 50 points lower at 6,949 DAX is expected to open 120 points lower at 11,850 CAC40 is expected to open 65 points lower at 5,060 (Danilo Masoni) *****