(Bloomberg) — The threat of trade tensions with the US is overshadowing a better-than-expected earnings season in Europe.
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Members of the Stoxx Europe 600 Index have beaten fourth-quarter profit estimates by 4% on an equal-weighted basis, “well above” the historical average, according to data from Goldman Sachs Group Inc. Yet, full-year 2025 projections have been reduced by about 0.5% since the beginning of the year, the figures show.
“Concerns around trade tariffs likely drive some of this pessimism,” strategist Lilia Peytavin wrote in a note Friday, adding that tariff-sensitive sectors such as basic resources, autos and chemicals have seen the sharpest earnings downgrades.
European investors have been on high alert since US President Donald Trump’s election victory in November as he has threatened sweeping global tariffs to pressure companies to move production to America. European automakers and miners are among industries most at risk due to large overseas sales.
Trump said Friday he would unveil new levies on automobiles from April, a day after he ordered his administration to develop plans for imposing reciprocal tariffs on numerous trading partners. Those are meant to offset not just levies on US goods but also non-tariff barriers such as regulations, value-added taxes and exchange rates, among others.
Citigroup Inc. strategist Beata Manthey said while Europe looks less exposed than peers to reciprocal tariffs as the differences in levies with the US “are mostly small,” the risk could be higher if the Trump administration were to focus on trade balances or value-added taxes.
For now, she said investors had already priced in some impact as a Citi basket of tariff-sensitive sectors has trailed an index of sectors that would be insulated from levies.
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