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LVMH, Kering rise after Morgan Stanley upgrades to

'overweight'

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B&M slides after dour profit forecast

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Shell gains after bright third quarter forecasts

(Updates with closing levels)

By Shashwat Chauhan, Amir Orusov and Pranav Kashyap

Oct 7 (Reuters) - European stocks slipped on Tuesday,

dragged down by healthcare and bank shares, while a luxury-led

rebound in France kept regional losses in check after Monday's

political upheaval.

The pan-European STOXX 600 closed 0.2% lower,

coming off its record highs hit in the previous session.

Spanish stocks also cooled 0.2%, after hitting a

near 18-year high on Friday.

French blue-chip stocks gave up gains to close flat

after a sharp selloff on Monday triggered by Prime Minister

Sebastien Lecornu's abrupt resignation.

WARNING OVER FRENCH BUDGET

The outgoing leader began two days of last-ditch talks to

try to form a new government, as analysts warned that the

political chaos could derail the 2026 budget.

President Emmanuel Macron faced mounting calls to resign or

call a snap election, amid a crisis that has seen five prime

ministers exit in under two years.

"For financial markets, what really matters is the budget

and how that's going to play out," said Anthi Tsouvali, multi

asset strategist at UBS Global Wealth Management's Chief

Investment Office.

"It's a situation where we might not have a government for a

while and it will create a lot of volatility."

France's benchmark index remains Europe's worst performer

this year, up 8% - a stark contrast to double-digit gains

elsewhere - underscoring the market's unease over a fragmented

parliament and rising instability since Macron's 2022

re-election.

Meanwhile, the outlook for European corporate health has

improved slightly, the latest earnings forecasts showed, though

the expected results would still be the worst quarterly

performance since the first quarter of 2024.

HEALTHCARE STOCKS AMONG BIGGEST DRAGS

The luxury sector jumped 1.8%, as designer debuts

among fashion houses and a push for affordability gave investors

hope that the sector was set for a gradual comeback.

Morgan Stanley upgraded its rating on luxury giants LVMH

and Kering to "overweight" from "equal

weight", sending their shares up 3.6% and 5.7%, respectively.

Heavyweight healthcare stocks were among the biggest

drags in Europe, down 0.4% as Denmark's Novo Nordisk

lost 2.8% after a U.S. court rejected its challenge to

Medicare's drug price negotiation program.

Germany's Bayer fell 2%, with traders pointing to

a Goldman Sachs note that said it expects third quarter earnings

to come below estimates.

Languishing at the bottom of the STOXX 600 was B&M,

which dropped 7.8% after the discount retailer forecast a 28%

plunge in first-half core earnings and lower annual profit.

Oil and gas got a boost with a 1.5% gain in Shell

after the energy major flagged higher LNG production

and better gas trading results for the third quarter.

On the data front, British house prices rose by a

slower-than-expected 1.3% in the 12 months to September, while

German industrial orders fell for a fourth straight month in

August.

Sweden's Skanska jumped 6.7% after Jefferies

upgraded its rating on the builder to "buy" from "hold" while

downgrading French cable maker Nexans to "hold" from

"buy", sending its shares down 4.9%.