The third-quarter earnings season is unlikely to be very good as a result of weak growth expectations, recent gains in the euro and a rise in input costs, but nevertheless, consensus expectations could still prove overly pessimistic, analysts at Exane write in a note.
Backing their view that any earnings disappointment could be contained, they cite how the run-rate of earnings growth "isn't cratering", labour costs are controlled and leading indicators for September have been rising.
"We think the consensual concern about the earnings season might be overly pessimistic. Moreover, if policymakers dominate the headlines like they did over the summer and/or leading indicators continue to improve, then earnings trends could be a sideshow once again. Spain, China and the US are potential risk factors to watch out for," they write.
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