Europe Earnings Revisions Slump in Warning Sign for Profit Bulls

Vanguard Group's Davis Says Selloff Was Inevitable

European fund managers betting earnings momentum will help lift stocks from the latest slump may have to temper their expectations.

Analysts who cut profit estimates for companies in Europe last week outnumbered those raising them for a third straight week, the longest streak since November, according to a Citigroup Inc. gauge. That adds to a growing list of worries for traders confronting the worst drop in equities since the aftermath of the Brexit vote.

The downward trend in the past few weeks largely stems from the stronger euro, which threatens to take a bite from the profits of Europe’s exporters. Some global heavyweights are already showing the strain this earnings season.

“Earnings revisions are not good, but also not unexpected because of the strong euro,” said Simon Wiersma, an investment manager at ING Bank NV in Amsterdam, whose firm has a neutral stance on European equities. “We will see some more downward revisions.”

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