Active investment commentary & analysis

April 2019 signals pivotal reporting season for European equities

April 2019 heralded what is to be a pivotal reporting season for European equities. The numbers that companies deliver, and the commentaries they give, for the full year 2019 should provide an interesting insight into the current state of European commerce and perhaps help indicate whether the Q4 2018 slowdown was temporary in nature or part of a more persistent issue. Certainly, the rate of increase in equity markets over the first four months of the year suggest the former is the most likely outcome. With another strong month in April, markets are now back close to the highs seen in the latter part of 2018, and much of the market fear, expressed in terms of volatility, appears to have subsided. The first of the reports to be published could be summarised as marginally positive to inconclusive, but, as yet, not an indicator of impending recession. In the US the picture seemed clearer with Bloomberg reporting that toward the end of the month, of those already reported, 83% were better than expected. This reflects the on-going strength in the US economy which does appear to be on a considerably stronger path than Europe at this moment in time. Unfortunately, the ECB did very little to bolster the weaker European economy, failing to deliver on the much-anticipated longer-term lending package for the region’s banks. It is, however, highly likely that we will see further stimulus in the coming months as there is no doubt that Europe’s prospects remain moribund when compared to its largest rivals including China, where economic indicators appear to be stabilising. What is becoming the almost repetitive to and fro on both Brexit and trade talks again resulted in no real conclusions for both, although the Brexit deadline is now extended to the 31st October and the House of Commons have voted against a so called hard exit.