European Stocks Soar on Recovery Optimism, But Q2 Earnings will Test Sentiments

European stock markets started the week in a positive tone, with all the major European stock market indices are trading in the green. The markets reported a weekly loss last week amid concerns over the fast spread of coronavirus pandemic because the US has reported six daily record coronavirus infections in the last 10 days.

The Asian and US stock market also started the new week in green. However, analysts believe the second earnings season, which is likely to kick off this week would test investor’s optimism. The earnings season would also test the bull-run that markets had witnessed over the last two months.

European region stock markets have rallied close to 30% on average since hitting March lows. Investors had taken advantage of selloff with the hopes that companies would see v-shaped recovery in the second half of the year. Consequently, investors are hungry to see second-quarter guidance.  

Volvo AB, Nordea Bank, and Electrolux AB are among the big companies that are likely to report earnings this week. The investors sentiments could turn negative if companies fail to present an optimistic outlook for the second quarter.

“Our focus for the quarterly results will not be the backward-looking damage in the second quarter, but more the forward guidance as economies start to reopen,” said Edward Park, deputy chief investment officer at Brooks Macdonald Asset Management. “The key for the second-quarter European earnings will be the corporate narrative for the recovery and guidance in a world less impacted by the daily swings of new case growth.”

What does it mean?

  • The DAX futures in Germany jumped 1.1% higher.
  • The FTSE 100 futures soar in the U.K.
  • Gold futures increased 0.5% to $1,810.90/oz,
  • EUR/USD pair traded 0.3% higher to 1.1332.


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