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Whereas Morgan Stanley will likely end up being proven right in its call for a US earnings recession in the first quarter, especially as Q1 consensus earnings continue to plunge, and are now well in the red, from being over 3% at the start of the year...
... and the only question is whether earning growth will then rebound back into the positive or continue to slide as MS' strategist Michael Wilson believes...
... Europe is already there.
As Deutsche Bank writes overnight, with more than 65% of market cap having reported results, historical Q4 European EPS growth stands at -1% year-on-year, the lowest since Q2 2016 and down from 8% for the full Q3 earnings season.
% - Disappointment - Relative - Expectations - Companies
Worse, this is a material 3% disappointment relative to consensus expectations for the companies that have reported so far and the largest negative surprise in four years.
This negative surprise is a reflection of the downside risks to consensus projections implied by the deterioration in Euro area growth momentum in Q4.
Breadth - Surprises - % - Level - Average
The breadth of surprises, at 45%, is at the lowest level since at least 2010 and is below the long-run average of 54%.
Looking at the composition, financials, industrials and consumer discretionary were all major drags on earnings, while among the companies that have reported so far,...
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