UPDATE 2-European shares pause as Brexit deal reports swirl

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* UK-EU negotiations twisting and turning in Brussels
* Gains in Volkswagen buoy auto sector, German stocks
* Roche rises after boosting FY profit forecast

(Updates to close)
By Sruthi Shankar
Oct 16 (Reuters) - European stocks pulled back slightly on
Wednesday from their strongest closing high in more than a year
as clashing headlines on Britain's last-minute efforts to forge
a divorce deal with the European Union left investors hanging on
the outcome.
Hopes of a breakthrough took the pan-European STOXX 600
.STOXX to its highest close since May 2018 on Tuesday, but the
index closed down 0.1% with London's exporter-laden FTSE 100
.FTSE , which tends to fall when the pound gains, lagging the
most with a 0.6% decline. GBP/
A report that the main stumbling block to a deal had been
removed to news that the talks had hit a "standstill" made for a
choppy trading session, but expectations of a no-deal Brexit
faded. "It's all about which way the Brexit wind is blowing," said
Edmund Shing, global head of equity derivatives strategy at BNP
Paribas. "We'd see a lot of more interest in domestic cyclical
names (if there was a deal)."
Britain's domestically focused midcaps .FTMC , which have
rallied 5% in the past three sessions to reach their highest
level in a year, ended flat on Wednesday, while Irish stocks
.ISEQ , which have come to be seen as a gauge of Brexit
sentiment, fell 0.5%.
Any new deal will still have to go to a fractious British
parliament. Among other regional indices, Germany's GDAXI .DAX gained
0.3%, while France's CAC 40 .FCHI was flat.
European automakers .SXAP rose 1.5% as industry data
showed car registrations in the bloc rose 14.4% in September,
led by robust gains at major brands Volkswagen VOWG_p.DE and
Renault RENA.PA . London-listed shares of Rio Tinto RIO.L fell 1.7% after
the miner said its iron ore shipments rose 5%, but it cut its
bauxite and alumina production forecast for the year.
Rio's shares also took a hit from China iron ore plunging to
a six-week low following a weak demand outlook. The wider European mining sector .SXPP was down 0.8%,
while the financial services .SXFP shed more than 1% on
declines in British stocks.
Investor focus shifts now to Europe's earnings season, which
gets under way in earnest next week. Analysts expect an earnings
recession to deepen as companies struggle with uncertainties
around Brexit, a protracted U.S.-China trade spat and Germany's
manufacturing recession.
STOXX 600 companies are now expected to report a drop of
nearly 3.7% in third-quarter earnings, worse than the 3% fall
expected a week ago, I/B/E/S data from Refinitiv showed.
Shares in Dutch semiconductor equipment maker ASML
ASML.AS , which has surged over 70% this year, declined 4.5%
after reporting higher-than-expected quarterly profit and
bookings. Shares in Thyssenkrupp TKAG.DE jumped 4.6% after a report
said rival bidders Kone KNEBV.HE and Blackstone BX.N teamed
up with potential partners to bid for the German group's
elevator business.