* STOXX 600 ends little changed
* Apple worries smash Dialog, but big banks play down risks
* Volatility index rises to more than 1-month high
* Alstom hit after reports of rival rail merger talks
* Autogrill rallies as spin-off move fuels M&A chatter
(Adds details, closing prices)
By Kit Rees and Danilo Masoni
LONDON, April 11 A sharp drop in shares of
Apple-supplier Dialog Semiconductor dominated trading in
otherwise muted European stock markets on Tuesday as a shortened
week and risk-off sentiment kept investors from making big bets.
The pan-European STOXX 600 ended flat as gains in
the luxury goods sectors offset weakness in chipmakers and
financials. Better-than-expected quarterly sales at LVMH
lifted shares of the world's largest luxury goods
maker to a record high.
European shares have been treading water in recent sessions,
with the benchmark index little changed so far this month on
mounting political tensions in the Middle East and North Korea,
above-average valuations and caution ahead of earnings season.
Expectations that European stocks might see bigger
swings in the short term rose to their highest since
end-February, following a similar spike in volatility on Wall
On the day, tech stocks were the worst sectoral performers,
with a sub-index tracking top European tech firms down
1.2 percent. Losses were led by Dialog Semiconductor,
which lost 14 percent after a German broker said the company
risks losing business from Apple.
Broker Bankhaus Lampe cut its rating on the chipmaker to
"sell" from "buy", warning that Apple could be
developing its own PMIC (power management integrated circuit).
Dialog Semiconductor supplies power management chips to Apple.
"We hear from the industry that about 80 engineers at Apple
are already working on a PMIC with specific plans to employ it
in the iPhone by as early as 2019," analysts at Bankhaus Lampe
said in a note.
Dialog sharespared some losses as big banks including
Barclays, Morgan Stanley and BofA-ML cast doubts on views that
the firm risked losing business from Apple and called the share
slide an over-reaction. Dialog had lost one-third of its market
value at one point.
Last week, shares in Imagination Technologies lost
two-thirds of their value after Apple, its biggest customer,
said that it would stop using Imagination's graphics technology.
"(Dialog Semiconductor) could potentially go the same way as
Imagination Technologies has recently. It just shows the risks
associated with companies being very reliant on one key
contract," Dafydd Davies, partner at Charles Hanover
Industry peer AMS also came under pressure after UBS
cut its rating to "neutral" from "buy", sending the stock down
9.5 percent, while STMicroelectronics fell 3.6 percent.
Elsewhere, share price moves were driven by dealmaking
French rail equipment maker Alstom fell 2.7
percent on reports that rivals Siemens and Bombardier
were in talks to combine their rail operations.
Italian restaurants firm Autogrill surged 8.2
percent to a record high after news that it plans to separate
its food and beverage business fueled speculation of possible
merger and acquisition activity.
Banking stocks dropped 0.7 percent, with Banco
Popular the biggest loser, down 9.7 percent and hitting
fresh record lows. On Monday, the bank said that it was
considering another capital hike to clean up its balance sheet
and would consider a merger deal.
(Reporting by Kit Rees and Danilo Masoni; Editing by Tom