The Q2 earnings season did not impress to this point however hasn’t was a catastrophe both, Barclays strategists mentioned in a Friday word.

“Whereas numbers are broadly okay to us, and y/y EPS progress is constructive once more, outcomes have did not elevate market sentiment, with Europe wanting softer than the US,” strategists wrote.

Barclays notes that the bar was set greater for the second quarter, which “raised the chance of journey & arrive.”

In Europe, earnings per share (EPS) beats have declined, with corporations adopting a extra cautious tone on the financial system, and Barclays analysts turning extra detrimental of their earnings outlook.

This quarter, share worth reactions for reporting shares in Europe have been probably the most detrimental in recent times, with extreme punishments for misses, particularly amongst Cyclicals.

“Nevertheless, it feels to us this was extra on account of positioning than a dramatic worsening of the outlook, so doubtlessly extreme in some circumstances,” strategists identified.

Additionally, whereas Europe’s worth motion has develop into extra risk-off, the US market exhibits a risk-on rotation, with small caps up for the week.

With indices nearing oversold ranges, resilient US knowledge, a Fed put in play, and main mega-cap names but to report, equities “could attempt to discover a flooring as dip consumers step in.” Nonetheless, the funding financial institution has been cautioning that markets face a extra complicated technical, macro, and political panorama in H2.

The Q2 EPS progress is monitoring 2% in Europe and 5% within the US year-over-year, with each areas in constructive territory for the primary time since Q3 2022. However though EPS beats and margins have declined in Europe, they’ve proven enchancment within the US, Barclays mentioned.