* European shares dip * Heavy earnings week begins * AMS soars after raising outlook, doubling revenue * Sanofi buys Ablynx for 3.9 bln euros, Ablynx +20% Jan 29 (Reuters) - Welcome to the home for real time coverage of European equity markets brought to you by Reuters stocks reporters and anchored today by Helen Reid. Reach her on Messenger to share your thoughts on market moves: helen.reid.thomsonreuters.com@reuters.net CLOSING SNAPSHOT: STOXX 600 EDGES LOWER (1637 GMT) Stellar results from chipmaker AMS and another big pharma deal dominated European share trading today, but a spike in bond yields hit income stocks and rate-sensitive sectors like real estate and utilities, weighing on the broader market. As a result the pan-regional STOXX index fell 0.2 percent. Here's your snapshot with provisional closing levels. (Danilo Masoni) ***** HOW MUCH WOULD YIELDS NEED TO RISE TO CAUSE EQUITIES PAIN? (1617 GMT) UBS' global macro strategists have been looking at how much yields would need to increase in order to douse the equity rally. The answer: a spike of at least another 35-40 basis points over the next few weeks. UBS analysed periods in the last 30 years where U.S. equities dropped by at least 5 percent and which were preceded by a "discernible" increase in 10-year U.S. yields. "While risks exist --at least in terms of historical precedents-- the drivers of reflation and higher yields are still benign," UBS strategists say in a note. UBS adds that investors should favour assets that perform best in this stage of the cycle eg. commodities, or feature high risk premia eg. Europe. (Kit Rees) ***** "TECH WON'T GO OUT OF FASHION" (1507 GMT) "The difference between tech and cyclicals is in the name: tech is structural, not cyclical. That's why it won't go out of fashion". Burkhard Varnhold, Deputy Global CIO at Credit Suisse WM, is clear-cut on tech and even though the sector's spectacular rally has lost steam recently, he believes there's more to come. "Tech will remain a critical component for all diversified portfolios and yes it will have another moment of fame taking over from cyclicals. But the real reason to invest lies not so much in timing as in its structural attractions. It's helping companies become better, fast and more productive. Therefore, it will benefit even from a downturn". But there is one caveat: investors need to be highly selective in their picks: "Tech is really one of those areas where active stock-picking is more important than in most other sectors. No matter whether you're looking at Robotics & Automation, Cyber-Security, or Digital-health & Med-Tech: in many of these markets, the winner takes it all which is precisely why every move matters!" (Danilo Masoni) ***** SIX POSITIVES FOR GLOBAL FINANCIALS (1414 GMT) Talking about volatility, it's one of the headwinds Citi analysts mention for global financials, a sector they rank with an "overweight". But despite this worry, Citi's analysts cite in a note six reasons for being positive on financials: 1) synchronised global growth 2) rising bond yields 3) 'solid' earnings growth rates 4) capital strength and capital return 5) peak regulation and 6) sector M&A. Among Europe's banks, Citi's top buys include Credit Suisse, KBC and Standard Chartered. (Kit Rees) ***** SPIKING BUND YIELDS: A SIGN OF "CLOUDS" GATHERING? (1401 GMT) Enrico Vaccari, fund manager at Italy's Consultinvest, is not so comfortable with rising bund yields, a move he says is driven by expectations of higher rates and which could result in higher volatility and eventually lead to a stock market correction. "Higher rates could be a problem for Europe," he said, noting that the region's economic recovery could be at risk if governments do not make much-needed structural reforms like the tax cuts adopted in the U.S. to help their firms become more competitive. "There are some clouds gathering and an increase in interest rates too soon could have very negative effects in Europe. The market is reflecting on that," he added. Vaccari - who is overweight banks, a sector set to benefit from a higher rate environment, and underweight defensives - also dismissed the view which is gathering consensus among market players that European equities could catch up with the record-breaking Wall Street indexes. He said there was a chance that the U.S. enters into a recession at the end of next year and that could be priced in by Wall Street eight months in advance, inevitably hitting Europe. "U.S. indexes are at record levels that cannot be sustained for long ... how would Europe manage to recover? What would be the catalyst?" (Danilo Masoni) ***** WITH BOND YIELDS RISING, IS IT TIME FOR VALUE INVESTING? (1335 GMT) Value investors have had less to celebrate than growth investors for many years, as you can see from this chart that shows MSCI global growth stocks far outpacing MSCI global value. Is the performance gap set to reverse as recovering European economies and falling youth unemployment nudge bond yields higher? Years of low rates have left investors comfortable to hold growth stocks offering merely a promise of future profits. Higher bond yields usually encourage investors to favour current cash flows to distant ones. JP Morgan global equity strategists say bond yields are moving higher for the right reasons -- a strong growth backdrop and tightening labour market. So it should not be seen as a problem from an equity point of view. Even if yields move higher due to inflation picking up, they say “equities could act as a good hedge -- as their earnings benefit from improving pricing power, stronger top-line growth and there is a potential for an asset rotation." Some are still cautious on the idea of a rotation to value stocks. "The jury is still out in terms of growth vs value - is value going to come back into favour? That is under investigation," says Gregory Perdon, Co-Chief Investment Officer at Arbuthnot Latham. He favours financial stocks in Europe, especially Italian financials, as "it's a sector that will finally start to shine. It's been difficult for them to make money when interest rates are low.” (Tom Pfeiffer and Helen Reid) **** BUNKERING DOWN FOR A TRADE WAR? BUY YEN (1251 GMT) Trade skirmishes, mostly played out through the imposition of protective tariffs, usually don't merit investors' attention. But the market is starting to make nervous noises about the U.S. government's increasingly aggressive trade stance, especially with the NAFTA renegotiations looming. "It's not obvious that stocks paid much attention to the two greatest trade conflicts of the past three decades," write JPM analysts. But could this time be different? They're pretty sanguine: "The Trump Administration could double or triple the average number of trade enforcement claims without harming risky markets more than intra-week, since the baseline for trade remedies is so low." They recommend investors stick to their guns and, if they're feeling cautious, buy yen as a hedge. "If risky markets overreact to a flurry of U.S. trade sanctions or Chinese retaliation due to very high valuations, the yen benefits." NAFTA remains the biggest potential trade speedbump. JPM recommends underweighting the peso and Mexican equities, on the possibility the renegotiations could be delayed by the Mexican general election. (Helen Reid) ****** RISK APPETITE DROVE 1 TRILLION EUROS INTO EUROPEAN FUNDS LAST YEAR (1222 GMT) It's a good sign for the European fund industry: over the course of last year assets under management increased from 9.4 trillion euros to 10.4 trillion, according to Lipper data. This was also an all-time high in terms of AUM for Europe's fund industry. Bond funds were the best-selling asset type for 2017, though Global Equity was the winner among long-term mutual funds. Question now is - will 2018 see more of the same? (Kit Rees) ***** BUND MILESTONE WEIGHS ON INCOME STOCKS (1200 GMT) The benchmark German five-year bond yield just turned positive for the first time since 2015 and the 10-year U.S. treasury yield is at its highest since early 2014. The equity market seems to be following the usual pattern of selling solid dividend payers -- consumer staples, utilities, telecoms -- when fixed-income yields start looking more attractive. All those categories have helped propel the STOXX 600 lower in late morning trading, while banks whose business benefits from higher rates are up. However, JPMorgan sees a sustained pick-up in bond yields as very important for the Euro zone's performance: "A sustained pickup in yields is required for Eurozone equities to perform better again ... If bond yields keep moving higher, as we expect, value should work and thus help the performance of the European market." (Tom Pfeiffer) ***** STRONG EARNINGS NEEDED TO BUOY STOXX 600 ABOVE 400 (1119 GMT) What could push the STOXX 600 sustainably above the 400-point level? It's flirted with it previously but never held out at those altitudes for long. Earnings are the key, JP Morgan analysts say. "Poor profitability was a major drag on Euro zone performance in the current upcycle," they note. European earnings per share haven't yet reached their pre-crisis 2008 levels while MSCI World earnings surpassed those highs long ago (see chart). But earnings beat expectations last year and should do so again in 2018, JPM says. Euro zone earnings are highly geared to GDP, which the bank's economists see growing 2.9 percent this year. On top of that valuations aren't demanding, relatively speaking. Both the STOXX price-to-earnings and price-to-book multiples relative to MSCI World are lower than at each of the past three market peaks, JPM notes. JPM has a year-end target of 430 for the STOXX 600, betting on the 'sustained breakout' above 400 which has for so long eluded the index. Their one note of caution? "FX is a wild card..." (Helen Reid) ***** IT'S NOT GOING TO BE A HAPPY VALENTINE'S FOR EUROPEAN FIRMS (1101 GMT) Sometimes you've got to break up to make up, at least with your shareholders - BAML's credit strategists are expecting to see an increase in Europe's big conglomerates slimming down this year. "We believe that the corporate "break up" theme is likely to grow in prominence this year as activist investors continue to warm to Europe, and rising equity markets expose the inefficiencies of big conglomerate companies," write BAML's credit strategists. BAML cites recent examples of Continental and Thyssenkrupp, pointing to Germany, France and the Netherlands as having the greatest share of conglomerates - thus the most likely areas to watch for corporate divorces. (Kit Rees) ***** CHIPMAKER SHARES PARE GAINS AFTER NIKKEI IPHONE REPORT (1045 GMT) The euphoria among European chip stocks after the blow-out guidance from AMS just faded a little after Nikkei Asian Review said Apple had told suppliers it will halve its Q1 production target for the flagship iPhone X to 20 million units from 40 million envisaged in November. Nikkei did not disclose the source for its report. Link: s.nikkei.com/2njmW Dialog Semiconductor, STMicroelectronics, Infineon and IQE have given up a chunk of their earlier gains. AMS is still up 18 percent, with analysts speculating that the Austrian company's upgraded guidance is driven partly by prospects for new business with smartphone makers beside Apple. (Tom Pfeiffer) **** AMS SEEN FROM THE STREET (1015 GMT) A 25 percent surge in ams has made the chipmaker the main focus in Europe's share trading this morning. The outstanding move comes after a surprisingly solid update that could help ease worries over the sustainability of a rally in richly valued tech stocks in a week where results from Facebook, Amazon and Apple will put the sector back at the fore of investors minds. We'll tell you more about tech but meanwhile here's a quick recap of sell-side vies on ams' results. Baader Bank: "ams referred to a range of sales pipeline opportunities in smartphone and consumer applications (3D, optical and spectral sensing) that were clearly coming into view.... Accordingly, the current valuation corresponds with a significant discount to the peer group average of about 14x, reflecting the single customer risk with Apple." UBS: "ams AG pre announced Q4 results with revenues expected to reach €470.3m vs UBSe €460m and cons €456.5m driven by 3D sensing and advanced light sensing (we believe Apple)." ZKB: "Guidance for 2019 has been increased considerably from EUR 1.5 bn to EUR 2.2 bn. Significantly visible growth opportunities in smartphone and consumer applications were put forward as the reason" Tech stocks remain the biggest sectoral gainers in Europe over the last 12 months but their rally has stalled as investors switched into banks and autos as the new year started. (Danilo Masoni) ***** WHAT YOU NEED TO KNOW BEFORE EUROPE OPENS Hedge fund Elliott Management buys stake in UK pay-TV group Sky MEDIA-Novo Nordisk is planning to raise bid for Belgian Ablynx- Bloomberg GKN received several approaches for business after Melrose bid- FT Roche wins FDA's breakthrough therapy label for autism drug Apple component supplier AMS doubles 2017 revenue, raises outlook German industrial workers to stage 24-hour strikes Banco BPM could be part of new wave of banking mergers - CEO Spain's Bankia posts a Q4 loss of 235 mln euros after BMN integration Provident Financial former execs sue lender over "unfair dismissal" ACS/Hochtief consortium picked for L.A. airport rail project Deutsche Bank to hike bonuses to more than 1 bln euros for 2017 - FAS France's Engie acquires Brazil's ACS Israeli investor secures 22.5 pct stake in Germany's TLG Immobilien MORNING CALL: EUROPEAN STOCKS TO RISE AS HEAVY EARNINGS WEEK BEGINS (0718 GMT) Good morning and welcome to Live Markets. Futures indicate a strong start for European stocks as a heavy week for corporate earnings begins. Investors are scrutinising this earnings season closely as a test of the foundations of the stellar run-up in equities, and to see whether last year's impressive earnings recovery has legs. In Asian trading the bull run continued, buoyed by strong earnings. Meanwhile the dollar managed to edge up from lows but remains under pressure. (Helen Reid) ***** (Reporting by Danilo Masoni, Helen Reid, Kit Rees and Julien Ponthus)