Eurozone economic outlook
2022-08-12
■European stocks: slowing corporate profit growth weighs on stocks going forward
■Government Bonds: Slowly Calming Down
The Stokes Europe 600 fell. Indices fell in the first half of the week on heightened views of U.S.-China tensions following U.S. House Speaker Nancy Pelosi's visit to Taiwan. Since then, there has been an increase in the search for individual stocks based on good settlements and other clues. As the Bank of England (BOE) decided to raise interest rates while anticipating a recession, the European Central Bank (ECB) also expanded on the idea of continuing to raise interest rates, capping a rise in share prices.
According to the data of financial information company definitive, 57% of the 324 companies that plan to publish their financial results from April to June have completed the announcement, and 65% of them have earnings per share* ¹ Exceeding market expectations. At present, the company's performance is supporting the stock price. However, as concerns about the deterioration of the European economy rapidly increase, the slow down of the company's profit growth will drag down the stock price.
German 10-year government bonds fell (yields rose). Reports of global recession fears affected Europe. Concerns intensified in the first half of last week, but by the end of this week, indicators related to the U.S.-China service sector business climate and U.S. employment data showed a positive trend.
The June-July bond holdings data released by the European Central Bank (ECB) confirmed that repayments from the Pandemic Emergency Purchase Program (PEPP) had been reinvested in peripheral bonds. The long-term interest rate differential between Germany and Italy has narrowed because political instability in Italy has subsided. Coupled with fewer market participants this week, wait-and-see sentiment could spread. European bond markets are expected to calm down while looking for a sense of direction.