As European stocks stumble from an all-time peak, the stakes are high for corporate earnings from a slate of industry bellwethers including ASML Holding NV this week to revive the rally.
Firms comprising about 21 percent of the Stoxx Europe 600 Index’s market capitalization are scheduled to report in the week through Friday.
Chip-equipment maker ASML is among the most high-profile as its outlook would draw scrutiny after Chinese start-up DeepSeek’s (深度求索) cost-effective artificial intelligence (AI) model rocked the technology sector.
Photo: Bloomberg
Luxury giant LVMH Moet Hennessy Louis Vuitton SE, German software company SAP SE, energy firm Shell PLC and lender Deutsche Bank AG are also on the earnings roster.
With the benchmark index retreating from record highs, investors would be looking for signs that profit margins remain robust as economic growth stabilizes. Currencies would also be in focus, as a weaker euro would boost exporters.
On the other hand, a stronger US dollar poses a threat to earnings at importers.
The bar to beat estimates overall is lower, with analysts expecting just a 2 percent increase in fourth-quarter earnings from a year earlier, Barclays PLC data showed.
However, even though the benchmark rallied as much as 4.5 percent this month, there is more room to gain in the event of good news, Eleva Capital SAS senior portfolio manager Stephane Deo said.
“When a stock disappoints in the US it gets hammered as it is typically now priced for perfection. In Europe, it’s the opposite,” Deo said.
“There’s so much bad news integrated in the price that it doesn’t take much in terms of positive surprises to trigger a surge,” he added.
The Stoxx 600 hit a record high last week on optimism that US President Donald Trump could take a softer-than-feared stance on global trade, but stocks were roiled yesterday as the buzz around DeepSeek sparked worries about elevated equity valuations elsewhere.
In terms of earnings, early reports in Europe have shown a mixed performance.
Burberry Group PLC surged 10 percent on better-than-expected sales, while Swiss luxury giant Richemont SA hit an all-time high after posting a stellar update.
Their results bode well for the broader sector as they assuaged worries about a slump in China — a crucial market for the group.
“If LVMH can confirm the trend, it would be a good signal, particularly for France and the sector,” Vega Investment Managers SA fund manager Olivier David said.
“From the feedback we’ve got, European corporates may also have benefited from US firms replenishing inventories ahead of a potential trade war,” he said.
On the other hand, Ericsson sank 13 percent after reporting a lower-than-expected profit on Friday, while BP PLC tumbled upon warning of broad-based weakness in its business outlook.
Retailers began the season on a dour note, with Primark-owner Associated British Foods PLC and Puma SE issuing disappointing reports.
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