LONDON - French political uncertainty and an EU trade spat with China are casting a shadow over European corporate earnings, investors say, despite forecasts that companies are set to deliver better results.
The STOXX 600 index, which touched a record high on June 7, the last trading day before Macron dissolved parliament, is down 2.5% from that peak. France's CAC 40, at its lowest since January, has borne the brunt of the selling. "Up until the European election, we think the European market was getting a bit more interest from global investors," said Steffen Weyl, euro-area fund head at Union Investment.
Political risks are a key reason why Citigroup recently downgraded continental European stocks to neutral in its global equity strategy. "A lot of the anecdotal evidence ... is that companies are clinging to their guidance and still have a positive view towards H2," said Mark Schumann, head of European large-cap mutual funds at DWS Group.
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