Mixed Q3 earnings won't derail equities

Reuters

Mixed Q3 earnings won't derail equities - Barclays

2024 10월 18 일, 오전 10:59 GMT

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STOXX 600 up 0.2%

Luxury, miners lead gains

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MIXED Q3 EARNINGS WON'T DERAIL EQUITIES - BARCLAYS

Q3 earnings season has got underway in earnest this week, with beats lower than usual and misses punished in Europe, but results so far don't look bad enough to derail this year's rally in equities, Barclays said in a note on Friday.

While it's still too early to draw any conclusions, the bank expects more downgrades in the coming weeks, given the high consensus estimates for 2025.

The ongoing weakness in the Chinese economy, which grew at the slowest pace since early 2023 in the third quarter, is still a burden for European earnings as demand, especially in manufacturing, remains sluggish.

"We believe that more data weakness will bring more stimulus, but recent communication suggests we haven't reached the 'whatever it takes' moment just yet", said Barclays equity strategist Emmanuel Cau.

With the U.S. election two weeks away, markets may also tread water as investors are likely to stay on the sidelines until that uncertainty goes away, he added.

However, equity investors haven't been too troubled by the prospect of economic slowdown this year, with some European indexes such as the benchmark STOXX .STOXX and German's DAX .GDAXI trading close to record highs.

And the mixed bag in third-quarter earnings season is not expected to hamper their direction of travel, according to Cau.

"This reporting season could even turn into a clearing event, as incoming data keep the U.S. soft landing narrative well on track into 2025", he said.

(Matteo Allievi)

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