LIVE MARKETS-The European stock market isn't the economy

Welcome to the home for real-time coverage of markets brought to you by Reuters reporters. You can share your thoughts with us at markets.research@thomsonreuters.com.

THE EUROPEAN STOCK MARKET ISN'T THE ECONOMY

Goldman equity strategists raised their STOXX 600 .STOXX EPS growth forecasts to 18% for 2026, far above the 3.3% their economists now expect nominal Euro-area GDP growth this year.

And to pre-empt any questions about how these two numbers can differ so much they've set out some explanations.

First of all, the breakdown of the index is rather different from the economy.

Looking at the EURO STOXX, they see financials account for more than 30% of earnings but only 10% of Euro Area economic activity. Energy and Technology are also more important to listed earnings, while Real Estate, Retail and Industrials account for 45% of the economy but 15% of listed earnings.

On top of that, they point out that more than half of STOXX 600 revenues are now generated outside Europe, so global rather than domestic growth is increasingly more relevant for listed companies.

And as well, Goldman reminds us an energy shock can weaken the economy while supporting headline earnings. Energy and Basic Resources benefit directly from higher commodity prices.

Mind you, they expect the gap to narrow in the coming years as the commodity rebound fades and global growth remains steady.

They see STOXX 600 EPS growth of 7% for 2027 and 5% for 2028, compared to euro area growth of 3.3% in 2026 and 2.8% in 2027.

(Alun John)

EARLIER LIVE MARKETS POSTS:

AI JITTERS? HISTORY POINTS TO MORE BUMPS AHEAD CLICK HERE

SHIFTS IN POST-ELECTION US STOCK-BOND CORRELATIONS CLICK HERE

BANKS LEAD EUROPE HIGHER CLICK HERE

BEFORE THE BELL: EUROPE MEETS MIDTERMS WITH A SHRUG CLICK HERE

MORNING BID: MARKETS FRET BLUE WAVE WILL DROWN DATA CENTRES CLICK HERE