No one’s really freaking out about a slowdown in Europe
Some of Europe’s largest firms are outperforming their US counterparts and people are optimistic about the continent’s future — despite the data
London — Europe is the epicentre for recession fears — but investors are cheering. The continent’s biggest companies have started to outperform their US peers on a forward-earnings basis, the cost of insuring against corporate defaults has fallen this year, and traders are betting that volatility will decrease. What makes this pivot towards optimism striking is that it runs against recent data. From flagging industrial output in Germany and France to worsening consumer confidence, official measures seem to indicate the economy is facing a rough patch. Investors have so far resisted the downward pull of bad macro-news, possibly because they expect corporate results to tell a different story. “There’s value in European equities,” said Chris Bailey, a European strategist at Raymond James in London. “I think European corporate earnings are going to beat the US. this year because the US’s late-cycle, tax-cut benefits are rolling off and earnings are coming down from a very high base.”
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