European stock markets, dominated by cyclical companies whose fortunes took a battering during the pandemic, have been much slower to see an earnings recovery than the tech-heavy United States market. That’s about to change: first-quarter earnings among Stoxx Europe 600 companies are expected to rise 47.4 per cent, according to Refinitiv.

Europe’s slower earnings recovery is mirrored by the slower recovery in stock prices. The US market had recovered all its pandemic losses by August and has hit dozens of fresh highs since then, whereas it took until last week for the Stoxx 600 to do the same.

European investors will be hoping stocks have finally broken out of a two-decade trading range. The Stoxx peaked around the 400 level in 2000, 2007 and 2015 before finally breaking out at the end of 2019, but the pandemic ensured it was a false dawn for investors.

As for now, the performance of other indices should temper talk of a pan-European stock market breakout. The most widely-traded European index, the large-cap Euro Stoxx 50, remains more than 25 per cent below all-time highs set 21 years ago, while indices in France, Spain, Italy and Ireland won’t be hitting records any time soon.

The Stoxx 600’s new highs are welcome but for most European investors, the long wait continues.


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