European earnings: Blink and you’d miss it

It is often said that corporates are the last to see signs of market deterioration, and therefore caution should be exercised when interpreting guidance statements. However, the market appears to be taking solace from recent rhetoric. So far this quarter 67% of companies have maintained full-year guidance, 19% have raised and only 14% expect to deliver worse results. Subsequently this is having an impact on shares.

Companies that lift guidance outperform by 2.2% on the day; those that cut underperform by 3.6%. On top of that, companies that lift guidance have seen estimates increased by c.5% this quarter; those that cut have seen 7% downgrades.