Trading remained cautious on Tuesday morning as investors had one eye on the start of the earnings season in the U.S., but strategists told CNBC that Europe's own fourth-quarter earnings season could throw up a few surprises.
Falling growth in the core European economies and continuing austerity in the peripheral countries is likely to have put pressure on European companies this season, and on the whole traders remain downbeat.
"Underwhelming," was Ishaq Sidiqqi, a market strategist at ETX Capital's prediction. Rebecca O'Keeffe, head of investment at Interactive Investor, said it'll be "less positive than other global earnings".
However, since poor third-quarter earnings last year, the markets have witnessed a pickup in U.S. economic data, a surge in European indexes and China regaining pace. Fourth-quarter earnings could reflect this, according to Sidiqqi.
"The likely winners and losers will be those corporates exposed to the recovery stories in the U.S. and China," he said.
A Reuters poll on Monday predicted that China's gross domestic product may show an expansion of 7.8 percent in the fourth quarter, stopping seven straight quarters of more modest growth. For this reason Sidiqqi says that miners are set to benefit from recovering metal prices.
"Likely losers will undoubtedly be retailers, as tough austerity across Europe keeps a cap on spending for consumers," he said.
"Food producers will win over clothing retailers but retailers with a strong online unit such as Next should continue to benefit."
Expectations are low for the retail sector, O'Keefe told CNBC.com. U.K. supermarket Tesco was one interesting stock that could surprise, she said.
European banks rallied once more on Monday as global regulators agreed to give banks four more years to build up cash reserves and widen the range of assets banks can put into this buffer. O'Keefe sees this as a warning sign that having rallied so much, the sector is "susceptible to disappoint".
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Sidiqqi expects investors to start to look beyond the headline numbers and focus on a company's outlook. U.K. retailer Debenhams announced record-breaking Christmas sales figures on Tuesday with sales up 5 percent in the five weeks to January 5. But a downgrade to its forecast for its gross margin in 2012 was enough to instigate a sell-off and shares fell around 6 percent in Tuesday trading.
"Outlook statements will be the key this season as they will set the tone for 2013," Sidiqqi said.
"Investors are more likely to focus on the outlook over the actual headline numbers with lifts to earnings guidance propping up share prices for the companies that can demonstrate strong visibility, healthy balance sheets and sound fundamentals."
Ishaq Sidiqqi at ETX Capital has no personal holdings in the above stocks, but ETX Capital's clients may have some holdings.