UPDATE: Next week marks a critical moment for the financial sector as major banks report earnings across Europe and the European Central Bank (ECB) decides on interest rates. Investors are bracing for significant developments starting on Wednesday, September 11, 2024, as the situation unfolds from Frankfurt to London.
Banking bellwethers are set to take center stage as analysts predict that the financial sector will maintain its positive earnings momentum. Citigroup recently described the first quarter as “remarkably resilient,” fueling expectations that earnings-per-share growth for the Stoxx 600 will turn positive year-on-year this quarter. However, while optimism surrounds the big banks, sectors such as luxury and energy face earnings downgrades.
UniCredit, the Italian banking giant, kicks off the earnings season on Wednesday. The bank aims to divert investor attention from its ambitious M&A plans, including a controversial increase of its stake in Commerzbank to 20%. Analysts from Saxo Bank point to the uncertainty surrounding UniCredit’s potential acquisition of Banco BPM, which was blocked by an Italian court. Despite these challenges, UniCredit’s stock has surged over 50% this year, offering some hope for CEO Andrea Orcel as he navigates expansion plans.
On Thursday, focus shifts to BNP Paribas, the euro zone’s largest lender by assets. Following a stellar performance last quarter, the bank is expected to report earnings that may slightly revise profitability targets downward. Also on that day, Deutsche Bank will unveil its latest financial figures. The German lender recently logged its best profit in 14 years, largely due to increased trading volumes amid market volatility. CEO Christian Sewing has highlighted new investment opportunities in Europe’s defense sector as a key growth area.
Meanwhile, the ECB is set to hold its monetary policy meeting on Thursday, September 11, where President Christine Lagarde and her team are expected to maintain interest rates at 2%. However, a looming threat from U.S. President Donald Trump regarding a potential 30% tariff on EU imports could dramatically alter the ECB’s course. According to Reuters, sources within the governing council believe that if Trump follows through on the tariffs, the ECB may be forced to adjust rates downward.
As tensions mount, Deutsche Bank warns that European inflation risks remain “underestimated,” with a notable complacency across key assets. The bank’s macro strategist indicated that the August 1 tariff negotiation deadline between the U.S. and EU sets the stage for a potential late outcome, which could trigger a “very sharp market reaction.”
The upcoming week promises to be pivotal for investors as they assess the implications of earnings reports and the ECB’s decisions. Market participants will be watching closely to gauge how the financial landscape evolves in response to these developments. As the situation unfolds, stay tuned for live updates and in-depth analysis.
Investors have until September 11 to evaluate the impact of these reports and decisions, marking a crucial period for the European financial markets.
