LONDON (Reuters) – Europe’s corporate recession is expected to deepen, the latest forecasts show, as companies struggle with uncertainties from Brexit, the protracted U.S.-China trade spat and Germany’s manufacturing recession.
Companies listed on the STOXX 600 <.STOXX> regional index are now expected to report a drop of as much as 3.7% in third-quarter earnings, worse than the 3% fall expected a week ago, I/B/E/S data from Refinitiv showed.
Earnings that grew by 14.4% in the same quarter a year earlier are seen posting their worst EPS since Q3 2016 when earnings fell 5%.
Consensus for revenue improved slightly with forecasts for flat growth, compared with a fall of 0.3% seen last week. Revenue rose 5.9% a year ago and grew by 3.3% in Q2.
Excluding the energy sector, Q3 earnings are expected to fall just 0.3% with revenue increasing 3.1%, the data showed.
As the global economy falters, investors have braced for a tough earnings season, which kicks off in earnest next week and will test the stock market’s stellar rally this year.
The pan European STOXX 600 <.STOXX> index is up 16.6% this year.
Companies in the region have been in an earnings recession since the second quarter when earnings fell 2.1%, posting their second straight quarterly fall. About 80 companies are due to report next week.
Q4 forecasts were reined in, I/B/E/S data from Refinitiv showed, with EPS expected to grow 9.1%, down from 9.6% last week, and revenue seen growing by 3.2%, down from 3.4% last week.
(GRAPHIC: Europe vs U.S. earnings – https://fingfx.thomsonreuters.com/gfx/mkt/12/7432/7363/earnings.png)
(Reporting by Josephine Mason; editing by Jason Neely)