Vodafone, Rio Tinto, Commerzbank, SAS, Volvo, Securitas, GDF Suez, Telekom
Austria, TUI, Hochtief and DSM, to name a few. Second-quarter earnings
declines, misses and disappointments have come from all sectors and all
industries. And the backdrop to results season has been further downgrades
to eurozone economic growth forecasts. It certainly seems as though punters
have not been able to get to the beach fast enough.
But the gloomy feeling across corporate Europeis borne out neither by the
results in aggregate nor by equity markets. According to Bloomberg data, of
the 300-odd companies to have reported, 3 per cent more have beaten
expectations than have missed them. Of course, there were big skews.
Consumer goods companies had a much better quarter than expected, while
earnings from financial and technology companies disappointed.
To be sure, half the market coming up short is hardly cause to pop the
champagne. Aggregate sales growth of just 4 per cent compared with the same
quarter last year, while earnings fell 6 per cent, is reason enough to reach
for the turpentine. On the contrary, though, investors have been in a party
mood. The Euro Stoxx index is up almost a fifth since the beginning of June
and is at its highest level since Easter.
Shares rallying
Why have European shares been rallying? The combination of a common bounce
after a steep fall from March, and results not being as awful as feared, is
the simple answer.
Indices have also been dragged higher by big leaps in the likes of BNP Paribas
and Société Générale thanks to solid earnings and capital rebuilding.
Indeed, large gyrations are to be expected these days given the changing
sentiment over the eurozone crisis, which remains the big issue. Also,
volumes are down for the summer. But if big moves are occurring on thin
trading now, expect big moves on heavy volumes when politicians and traders
return from their holidays.
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