UBS raises earnings forecast in Europe as stocks experience longest winning streak since June

The Stoxx Europe 600 was expected to tie its longest winning streak since June on Wednesday and post a new record close, as a major investment bank raised its forecast for the region’s earnings.

Up nearly 19% since the start of the year, the Stoxx Europe 600 SXXP index,
+ 0.42%
just overtook the 18.4% gain of the S&P 500.

Wednesday’s rise saw the Stoxx 600 rise nearly 0.4% to 474.45, which would mark a new high close to Tuesday’s if those gains continue. Among the regional indices, the German DAX DAX,
+ 0.35%
is up 0.5%, the CAC 40 PX1,
+ 0.55%
was up 0.5%, and the FTSE 100 UKX,
+ 0.83%
climbed 0.7%. The gains were prolonged, as US inflation data showed consumer prices rose as expected in July and US stocks climbed.

Some of the best earnings in more than a decade and a fifth straight quarter of earnings surprises for European companies have pushed the 2021 consensus earnings growth estimate to 55% from 36% in March, the strategist said. UBS, Matthew Gilman. He raised his own forecast to 60% from 50%, but reduced his 2022 outlook to 8% from 12%.

Given “the exceptional recovery in profit margins to date, further margin expansion is likely to be more limited as operating costs come back as businesses reopen, as support programs in hand “Work will end and input costs will rise,” Gilman told customers in a note released Tuesday.

UBS’s sector preferences are unchanged and supported by quarterly results, with energy, materials and financials positioned to benefit from higher prices for longer, strong growth and higher prices, respectively. cash returns.

Finances were in the spotlight on Wednesday, with ABN Amro ABN,
+ 8.60%
shares climbed 5%, after the Dutch bank said it had net profit for the second quarter of 2021 and its capital position was strong.

A series of other revenues were generated, in particular from the German utility E.ON EOAN,
+ 0.47%,
which reported second quarter earnings more than doubled and boosted its outlook for the full year. These shares have increased modestly. German specialty chemicals manufacturer Lanxess LXS,
-3.42%
lifted its adjusted earnings outlook this year, but reported higher sales and lower second-quarter earnings, leaving its shares down 3%.

Ahold Delhaize shares AD,
+ 3.33%
climbed 2.6%, after the Dutch grocer reported a decline in second-quarter net profit and sales, although both beat analysts’ forecasts and lifted forecasts for the whole year.

Thyssenkrupp PTG,
-5.43%
was the worst performing company on the Stoxx Europe 600, with shares slipping more than 6% after the German industrial conglomerate said it posted a net profit, but it reported a potential negative cash flow of 1 , 5 billion euros (1.76 billion dollars). He also said it would take time for higher steel prices to be reflected in the bottom line.

German consumer prices climbed 3.8% in July per year, confirming preliminary data, German statistics office Destatis said on Wednesday.

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