Weak demand leads to frequent profit warnings from European giants, fears of stock market gains being heavily impacted.

European major companies have been lowering profit targets due to weak demand, posing a significant threat to the upward momentum of the stock market this year. The company strategy team led by Andreas Bruckner at Bank of America Corp pointed out that during the current earnings season, the magnitude of profit guidance downward revisions has seen a "significant" increase, far exceeding the average level of the past four quarters. For example, food giant Nestle (NSRGY.US) had to lower its sales expectations for this year due to consumer sensitivity to price increases. Similarly, luxury goods giant Kering, Inc. Sponsored ADR Class A, which owns brands such as Gucci, also issued a warning, expecting a significant decline in profitability in the second half of the year due to weakening demand for luxury goods. Moreover, Mercedes-Benz Group has also lowered its profit margin forecast due to fierce competition in the Chinese market. Data from Bloomberg Industry Research shows that analysts expect a 4% year-on-year growth in profits for companies in the STOXX 600 index in Europe by 2024, a expectation that had driven the index to new highs this year. However, if actual growth falls below expectations, it could hinder further growth in the index. "The signs of consumer pressure have raised concerns in the market," Bank of America Corp strategists stated in their report, despite overall good performance in the second quarter. They emphasized that continued weak demand in China and unexpectedly soft demand in the United States have had a particularly large impact on the luxury, consumer goods, and automotive industries. Although analysts who have lowered profit forecasts this earnings season outnumber those who have raised them, Morgan Stanley strategists expect that as profits recover, this ratio will turn positive again. However, achieving higher profits in a challenging macroeconomic environment remains difficult. Growth in the eurozone private sector nearly stalled in July, especially due to drag from France and Germany, forcing companies reliant on profits from the Chinese market to also contend with weak consumer demand. According to data from Bloomberg Industry Research strategists Laurent Douillet and Kaidi Meng, as of July 24th, the median earnings per share forecast for European companies in 2024 that have lowered earnings expectations has decreased by 3%. Their analysis shows that the number of companies that have lowered expectations slightly exceeds the number that have raised them, while most companies that have provided detailed information have maintained their targets. Bloomberg Industry Research strategists wrote in their report, "Prominent companies lowering earnings expectations, as well as profit-taking by high-rated companies, have dominated the news headlines and weighed down on European stock indices. The market generally expected growth industries to raise earnings expectations, leading to some profit-taking, while the uneven profit trend in cyclical industries suggests that the recovery in the second quarter may be relatively weak."