LIVE MARKETS-Will investors swap U.S. banks for Europeans?

LONDON, March 7 - Welcome to the home for real-time coverage of European equity marketsbrought to you by Reuters stocks reporters and anchored today by Julien Ponthus. Reach him onMessenger to share your thoughts on market moves: julien.ponthus.thomsonreuters.com@reuters.net WILL INVESTORS SWAP U.S. BANKS FOR EUROPEANS? (1221 GMT) After meetings with 100 investors in Britain, Europe and the United States, JPMorganconfirms its overweight U.S. over European banks and says that despite all the positive economicgreen shoots in Europe, stock picking is not that easy. "For European Banks to re-rate, we would need to see positive operational gearing drivingearnings upgrades. In our discussion with global investors, especially the US marginal investorwho spends a majority of their time on the US rather than Europe going through the issues, theconclusion still remains that US banks will outperform Europe," analysts at the US bank say. "We agree with that view for now," they add. So where will investors put money in European banks? "A slim picking," they note, although there are still some interesting takeaways: * Less and less interest in the geographically diversified business model such as banks likeBNP Paribas, Societe Generale, Santander and BBVA * More and more a view in the U.S. that the domestic Spanish banks re-rating thematic hascome to a pause until next year when Euribor may start to move upwards * Ongoing momentum and interest in the Italian banks, especially UniCredit and Intesa Sanpaolo US banks have recovered almost all of the losses they made since the globalfinancial crisis in 2007 as the Federal Reserve has started to raise interest rates and DonaldTrump is cutting down regulation. European banks instead have been left behind, as yousee in the chart. (Danilo Masoni) ***** INCOMING: BREXIT HEADLINES! (1134 GMT) The EU's Tusk is to present the bloc's draft guidelines for a future relationship withBritain after Brexit at 1215 GMT but the key point has already leaked out: the bloc plans tooffer British-based financial services companies only limited access to the Single Market,according to a draft document quoted by Bloomberg. Britain's Hammond will get a chance to answer at 1430 GMT when he announces his Brexit planfor banks and how he intends to protect the industry from a Brexit hit. In the meantime, the British banking sector is down 0.1 percent. Notice thatthe pound, which rarely trades in the same direction than the FTSE, is losing close to 0.3percent against the euro. The British blue chip index is down 0.1 percent. Here are the views of Andreas Koening, head of global FX at Amundi, on sterling: "I am short on sterling. They were too positive before Brexit negotiations a couple of weeksago. There are more frictions in the discussions. I think significant detereoration in Brexitnegotiations is not priced in. They still expect some kind of deal which is the most logicaloutcome. But if something negative happens, then we go another 3-5 percent down from currentlevels." (Julien Ponthus and Saikat Chatterjee) ***** #EUROBOOM LOSING SOME OF ITS SHINE (1113 GMT) Figures from Eurostat confirm Eurozone GDP expanded by 0.6 percent in Q4 with both domesticdemand and trade boosting growth, but some signs of weakness emerged. Consumption growth was the weakest in nearly four years, at 0.2 percent, Oxford Economicslead economist Nicola Nobile writes. "These latest numbers do take some of the gloss off the #Euroboom," Nobile says, adding thepick-up in inflation could be the reason why consumers have been more reluctant. Exports growth has remained strong, however, up by around 2 percent over the quarter. "This confirms our view that Eurozone companies have taken stock of the acceleration inworld trade and dynamic domestic demand that have increased capacity pressures in industry, byramping up investment," he says. (Helen Reid) ***** EUROPE Q4 PROFIT GROWTH STILL SEEN BEATING U.S. (1022 GMT) The reporting season in Europe is past its mid point and as numbers continue to roll inearnings expectations confirm their solid momentum and still point to stronger fourth quartergrowth in Europe than in the United States. Combined fourth-quarter profits of companies in the pan-European STOXX 600benchmark index are seen rising 19.4 percent, against the 15.1 percent rise expected for the S&P500, according to Thomson Reuters analyst David Aurelio. Revenues in Europe are seen rising 2.5 percent, against 8.2 percent for the U.S., indicatingthat cost cutting is a key driver for the outperformance. At the country level, Austria (+117.7 percent) and Italy (+51.5 percent) are leading theadvance, while the UK (+15.4 percent) is below the rate expected for the STOXX. Here's your Q4 forecast chart: And here are forecasts for 2018 that show growth slowing to 1.8 percent in the first quarterand climbing back to a peak of 17 percent in the third quarter: (Danilo Masoni) ***** RETURN OF TRADE WAR: HOW WOULD ESCALATING TARIFFS IMPACT EUROPE? (1018 GMT) The latest episode in a developing trade spat between the U.S. and the rest of the world hasput a dampener on trading today. "Markets viewed Cohn as a voice of reason on trade policy," says UBS Chief Economist PaulDonovan. "The Trump Twitter feed has denied "chaos" in the administration, but senior staffturnover has been unusually high. This undermines the policy continuity that markets crave." Tariffs on steel alone would pose no great risk to the Eurozone, UBS analysts argue: thebiggest exporters of steel to the U.S. are Canada, Brazil, South Korea, Mexico and Russia. But should a fully-blown trade war develop and impact other areas, this would of course benegative. To assess the potential impact, UBS has collated the biggest sectors exporting to theU.S. - and therefore most at risk from protectionism (see table below). "Apart from automobiles, pharmaceuticals and machinery equipment rank highly and would thusbe hit hard by U.S. import tariffs," analysts write. (Helen Reid) ***** AD AGENCIES WPP, PUBLICIS HIT BY P&G SPENDING CUT (0906 GMT) It's the latest bit of bad news for advertising giants WPP and Publicis,whose shares are among the notable fallers today. Procter & Gamble is reported to be cutting its spending on ad agencies by $1.25 billion overthe next three years, aiming, according to the Telegraph, to "take back control" (where have weheard that before?) from the big agencies and invest instead in internal analytics. Digital disruption of the advertising model has put ad agencies under increasing pressure inrecent years. Below you can see that 2017 was the first year in many that WPP's shares didn'tfollow the market higher, as bigger corporate budgets stopped automatically translating intomore ad agency spending. (Helen Reid) ***** OPENING SNAPSHOT: TRADE WOES WEIGH, ROLLS ROYCE SHINES (0821 GMT) Shares across Europe are falling and nearly all sectors are in the red this morning afterGary Cohn's resignation reignited concerns over trade wars. But on the corporate front there are some outstanding performers, particularly among UKfirms, which could be helping the FTSE 100 outperform European peers. Rolls Royce shares are up 10.6 percent after the engine maker reported strong resultswith profit beating expectations. Smurfit Kappa is also a top gainer, up another 3.7 percent after having shot up 20percent on Tuesday. Its suitor International Paper confirmed it had proposed 8 billioneuros for the company. Meanwhile ad agencies' shares are falling, with traders pointing to an FT report thatProcter & Gamble is to cut ad agency spending by $1.25 billion over the next three years. Publicis and WPP are both suffering, down 2.4 percent and 1.7 percent. (Helen Reid) ***** COMPANY NEWS MORNING HEADLINE ROUND-UP: They’re back. Trade war fears made a comeback last night when Donald Trump made freshcomments on tariffs and his economic adviser Gary Cohn, seen as a bulwark against protectionistforces within the administration, resigned. European futures are lower, in line with Asian indexes and U.S. futures which are also innegative territory. Wall Street closed too early to digest the news. So it’s mainly about politics today but there’s still some corporate news to animate thesession, including International Paper's confirmation of its proposed takeover of Smurfit Kappa:Telecom Italia promises higher investor returns under 3-yr digital pushRolls-Royce 2017 profit beats, cautious on this yearSmurfit Kappa rejects International Paper's $10 bln bidSAP execs see margin gains beyond 2020 as cloud costs subsideDeutsche Post DHL eyes further profit increase in 2018RTL sees revenues growing 2.5-5 pct in 2018Novartis, U.S. partner plan remote trials to boost participationUK insurer esure's full-year pretax profit rises 35.6 pctItaly's Carige says can't meet new investor's board seat requestRBS reaches $500 mln settlement with New York over mortgage securitiesYNAP in line with 5-year plan, core profit margins to rise in 2018 -CEO(Julien Ponthus and Tom Pfeiffer) **** EUROPEAN FUTURES OPEN LOWER AS TRADE WAR FEARS SPREAD (0710 GMT) European futures have opened lower as fears that new U.S. tariffs could ignite a trade warspread to Europe: (Julien Ponthus) ***** MORNING CALL: EUROPE SEEN OPENING LOWER AS TRADE FEARS RETURN (0617 GMT) Fears of an imminent trade war had eased during the previous session, allowing shares torecover but the resignation of White House economic adviser Gary Cohn, seen as a bulwark againstprotectionist forces within the Trump administration, means we are back where we were. Financial spreadbetters expect London's FTSE to open 18 points lower, Frankfurt's DAX down36 points and the Paris CAC down 16 points at the open. (Julien Ponthus) **** (Reporting by Danilo Masoni, Helen Reid, Kit Rees and Julien Ponthus)