European companies and their investors have been pinning hopes on growth in the U.S. and Asia to offset weak growth at home — but strategists have told CNBC that stock-pickers should be very careful to avoid big third-quarter disappointments.
"The writing is already on the wall," Gemma Godfrey, head of investment strategy at Brooks Macdonald said.
"After such a strong stock market rally, growth in earnings is needed to justify the jump. However, European companies are already issuing profit warnings which markets may not have fully digested."
Unilever was one of the first to sound the alarm. Last week, the consumer goods company said that weakening growth in many emerging countries in the third quarter will mean sales will miss current targets. U.K. supermarket Tesco followed on Tuesday with more bad news, highlighting a hit from restructuring costs and steep profit falls across Europe and Asia.
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U.K.-listed mining stocks have been hit by persistent worries over Chinese growth. But Brenda Kelly, a market strategist at IG, predicts the sector will weigh down the FTSE 100 and it will fade from the 6,440 levels it has been clinging to.
"To take advantage of the mining sector will need a long term view – so with that in mind, I'd look to the likes of Anglo American – palladium producer which gives exposure to the rising auto sales segment," she told CNBC.
With weak growth data casting a shadow over China three months ago, many investors looked to the U.S. for a revenue boost for European companies.
However, this time around, the partial shutdown of the government following the breakdown of budget talks – plus the looming threat of the first ever U.S. default means that relying on America won't be so easy.
"U.S. exposure which has been an asset for firms, may be the opposite looking forward over the next few weeks," Godfrey said. "The uncertainty of the shutdown and debt ceiling debate may discourage the deploying of capital at a time when investors want cash-rich firms to put capital levels to good use."
But Brenda Kelly, a market strategist at IG, believes that exposure to the right sectors of the U.S. recovery, could be the correct play. Non-essential consumer discretionaries have outperformed consumer staples in the U.S., according to Kelly, adding that much of this can be down to auto sales which have done exceedingly well recently albeit from a low base.
Kelly's view coincides with Tuesday's earnings news from Wolseley, the UK supplier of builders' products, which boasted trading profit for its ongoing businesses rising 10.7 percent from this point last year.
"The highlight of these results was another strong performance across our U.S. business where we achieved good revenue growth," Ian Meakins, chief executive at the company said in the earnings release.
Away from the key trends, Kelly is eyeing individual stocks such as U.K.-listed telecom Vodafone, which is in the process of selling its stake in Verizon Wireless and seal a deal to but Kabel Deutschland.
"I have been a fan of Vodafone for a while," she told CNBC. "Any pullbacks should be viewed as an opportunity as I feel there is a great compunction to see higher prices in the coming months."
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After China worried investors in the previous quarter, there are other parts of Asia that have some good news for investors and European companies. Rebecca O'Keeffe, head of investment at Interactive Investor, told CNBC that Asia has performed well in the third quarter, with Japanese companies continuing to benefit from the yen's devaluation. O'Keefe believes that investors may do well to switch their allegiance back east.
"In addition China's recovery seems well underway. So unlike the previous two quarters, European investors have more to worry about from the U.S., rather than Eastern economies," she said.
Brenda Kelly and IG Markets have no personal holdings in the above stocks, but IG's clients may have some holdings.
—By CNBC.com's Matt Clinch. Follow him on Twitter @mattclinch81