European Stocks Surge Amid Record Earnings, Tariffs on the Agenda
London, UK - February 19, 2023
European equity markets have reached unprecedented heights this month, bolstered by companies surpassing expectations with their fourth-quarter revenue reports. However, the dominant topic among executives is the looming threat of U.S. tariffs.
Tariff Talk Dominates Executive Discussions
Market intelligence platform AlphaSense reports a surge in mentions of "tariff" or "tariffs" in STOXX 600 earnings transcripts, indicative of companies' growing apprehension about President Donald Trump's protectionist policies.
Increased Earnings Volatility on Results Day
Earnings season has witnessed heightened share price volatility, with larger swings in both directions. Bank of America data shows that companies missing expectations have experienced a median one-day underperformance of 2.6%, the highest since 2012.
Weak Euro Boosts Sales
Over two-thirds of STOXX 600 companies reporting Q4 sales figures have surpassed estimates, driven in part by the euro's depreciation against the dollar. Barclays European equity strategist Magesh Kumar Chandrasekaran attributes this performance to "top-line strength owing to FX tailwinds."
Luxury Sector Rebounds
Despite tariff concerns, sales from the luxury sector have largely exceeded expectations, leading to an upturn in fortunes for some lagging stocks. Surprise resilience in Europe and the U.S. has contributed to improved performance.
Banks Continue Surge
European banks have reported strong profits in the fourth quarter, driven by robust margins and favorable interest rate conditions. The STOXX Europe 600 banks index is on track for its ninth consecutive week of gains, its longest such streak since 1997.