brokers investors warn of hit to earnings from rising euro
Last Updated : GMT 06:49:16
Arab Today, arab today
Arab Today, arab today
Last Updated : GMT 06:49:16
Arab Today, arab today

Brokers, investors warn of hit to earnings from rising euro

Arab Today, arab today

Arab Today, arab today Brokers, investors warn of hit to earnings from rising euro

he extent to which the euro’s rise
London - Arab Today

The euro’s blistering rise to a two-year high could start to threaten the bright outlook for European firms’ profits, big brokers and investors warned, putting a dampener on enthusiasm around the region’s equity markets which have drawn strong inflows this year.
More than half the revenue of top European firms is generated outside the euro zone, according to Thomson Reuters data, meaning a strengthening euro has an adverse impact on those revenues once they are brought home.
As European earnings season kicks off in earnest over the coming week, the extent to which the euro’s rise is hurting companies earning revenue outside the euro zone will be a key area of focus for investors.
Every 10 percent rise in the euro trade-weighted index takes 5 percent off the STOXX 600 earnings per share (EPS), Deutsche Bank strategists found.
For Nandini Ramakrishnan, global market strategist at JP Morgan Asset Management, Europe remains the most favored equity market globally given a good economic backdrop and recovery in earnings growth, but the strengthening currency is a concern.
“The main challenge for European equities is the strength of the euro,” said Ramakrishnan.
Earnings growth in Europe is expected to come in at around 14 percent this year, according to Thomson Reuters data, a striking turnaround after five years of sluggish to zero profit improvements.
The upbeat outlook for European earnings has seen global investors pump money back into regional stocks, pushing up valuations to above long-term averages. Some $19 billion has poured into European equities over the past three months, EPFR data shows.
“We do expect the currency to strengthen given the ECB (European Central Bank) tapering, but that should not derail earnings growth,” Ramakrishnan added.
The euro has run up this year as a brightening macroeconomic backdrop dovetails with easing political concerns after the French election and an ECB getting ready to ease stimulus as inflation picks up.
For strategists at Deutsche Bank the relatively weak start to European earnings season is partly down to the euro’s strength.
“With the euro trade-weighted index up 5 percent between the middle of April and the end of June, FX strength is set to weigh on euro earners’ results, which will likely contribute to subdued beat ratios for the remainder of the season,” the strategists said in a note.
Roughly 18 percent of the MSCI Europe index constituents have reported results so far.
Morgan Stanley strategists also voiced their concerns, pointing out that the earnings revisions ratio — a metric which tracks the number of upgrades to downgrades and measures analyst sentiment — has hit an 11-month low with financials the only sector not seeing downgrades.
Companies that are more export-focused are the most exposed to a strengthening euro which makes their products more expensive abroad.
Industrial stocks are on track for their biggest one-month loss since October 2016, having fallen over the past two months, while export-focused autos have held up better, managing a 1.2 percent gain so far in July against a loss of 1.3 percent for the STOXX 600.
Autos were the worst-performing sector on Friday, down 2.4 percent.
Industrials have drawn particular attention, with Deutsche Bank highlighting their weak results so far as a reason for the lacklustre start to the earnings season.

Source: Arab News

arabstoday
arabstoday

Name *

E-mail *

Comment Title*

Comment *

: Characters Left

Mandatory *

Terms of use

Publishing Terms: Not to offend the author, or to persons or sanctities or attacking religions or divine self. And stay away from sectarian and racial incitement and insults.

I agree with the Terms of Use

Security Code*

brokers investors warn of hit to earnings from rising euro brokers investors warn of hit to earnings from rising euro

 



Name *

E-mail *

Comment Title*

Comment *

: Characters Left

Mandatory *

Terms of use

Publishing Terms: Not to offend the author, or to persons or sanctities or attacking religions or divine self. And stay away from sectarian and racial incitement and insults.

I agree with the Terms of Use

Security Code*

brokers investors warn of hit to earnings from rising euro brokers investors warn of hit to earnings from rising euro

 



GMT 19:22 2017 Monday ,13 March

Palestinian killed in clashes near Lebanon

GMT 18:58 2017 Sunday ,22 October

King Salman receives Iraqi PM

GMT 13:06 2017 Monday ,21 August

Dina Batma confident of success of her clip

GMT 19:11 2017 Friday ,28 July

Kuwait, Turkey leaders hold talks

GMT 13:42 2016 Sunday ,27 November

UAE Consul-General meets Indian official

GMT 10:15 2017 Tuesday ,26 September

Actress Hind Sabry says her dream came true

GMT 14:01 2016 Thursday ,08 December

Environmentalists mobilize for battle with Trump

GMT 04:17 2017 Tuesday ,15 August

US Drone Attack Kills Four in Pakistan

GMT 00:22 2017 Tuesday ,07 February

DEWA cleans up Jebel Ali marine sanctuary

GMT 20:23 2017 Friday ,24 March

Iranian President to Visit Moscow Next Week

GMT 09:30 2017 Saturday ,14 October

Ton-up Babar helps Pakistan ease past Sri Lanka

GMT 13:24 2016 Friday ,12 February

Daesh group has used, can make chem weapons

GMT 16:50 2017 Sunday ,23 April

Tunisian gangs store quantities of expired food
Arab Today, arab today
 
 Arab Today Facebook,arab today facebook  Arab Today Twitter,arab today twitter Arab Today Rss,arab today rss  Arab Today Youtube,arab today youtube  Arab Today Youtube,arab today youtube

Maintained and developed by Arabs Today Group SAL.
All rights reserved to Arab Today Media Group 2021 ©

Maintained and developed by Arabs Today Group SAL.
All rights reserved to Arab Today Media Group 2021 ©

arabstoday arabstoday arabstoday arabstoday
arabstoday arabstoday arabstoday
arabstoday
بناية النخيل - رأس النبع _ خلف السفارة الفرنسية _بيروت - لبنان
arabstoday, Arabstoday, Arabstoday