Europe's Stoxx 600 peaks; Barclays analysts note lift from "solid" earnings season

Published 05/10/2024, 05:32 AM
© Reuters -- The pan-European Stoxx 600 touched a fresh record peak on Friday and is on track for its largest weekly uptick since January, a jump that analysts at Barclays said is due in part to strong quarterly results from many of the region's biggest companies.

The latest batch of three-month reports out of Europe have been "solid," the Barclays analysts argued on Friday, with resilient margins offsetting softer revenues and firms broadly sticking to their full-year guidance.

"Their tone on the outlook" for the wider economy has also improved, they noted. As a result, earnings momentum has been "better," driving up equities across the continent, including the benchmark average in leading economy Germany.

Meanwhile, recent commentary from European companies indicate that consumer demand in the region is "largely positive or neutral," the Barclays analysts said.

In a note to clients assessing returns from the first-quarter earnings season for European firms, the Barclays analysts said that elevated inflation, which has recently persuaded many shoppers to ratchet down spending, has moderated.

Although they predicted that inflationary pressures will push up labor costs and weigh on profit margins, the analysts said most European companies are confident on their pricing power and ability to pass on expenses to consumers.

"Firms also cite that they are seeing disinflation in other areas, like raw material costs, which likely helps," the Barclays analysts said.

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