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Consumer Cyclicals
Large Cap
Market Cap £97.01bn
Enterprise Value £142.32bn
Revenue £38.39bn
Position in Universe 8th / 850

Billions flow back into European equities as revenue outlook improves

Mon 23rd February, 2015 3:11pm
* Revenues set for best quarter in 2-1/2 years 
    * Exposure to euro zone equities highest since 2007 -BofA/ML 
    * Oil hinders revenue growth, but still beats expectations 
    * Exporters, consumer stocks attract most inflows 
    By Alistair Smout 
    LONDON, Feb 23 (Reuters) - Fund managers are pouring 
billions of dollars into European stocks as forecast-beating 
quarterly revenues bolster expectations for a recovery in 
corporate earnings. 
    European equities saw their largest ever inflows last week, 
totalling $5.8 billion according to EPFR, and investors are 
buoyed by improving domestic demand in Europe and a drop in the 
euro, which should boost export competitiveness. 
    Corporate revenues are still declining, and there are 
substantial market jitters over the sovereign debt stand-off in 
Greece and tensions between Russia and the West over Ukraine. 
    However, European shares are trading at seven-year highs in 
part because many in the market believe companies in the region 
have turned a corner.  
    Investors lifted their exposure to euro zone equities to the 
highest since May 2007 in February, a Bank of America Merrill 
Lynch survey showed last week, confirming trends seen in a 
Reuters survey.  ID:nL5N0VR1ZZ   ID:nL6N0V91HH  
    Fund inflows have helped push the pan-European STOXX Europe 
600  .STOXX  up 12 percent since the start of 2015, after a 
modest 4.4 percent gain last year, and Germany's DAX index 
 .GDAXI  has set new record highs. 
    German equities and discretionary stocks are the most 
popular trades among foreign investors, who have pumped $21 
billion dollars into European stocks since the start of the 
year, BNP Paribas said, as investors play on the themes of a 
weak euro and a more confident consumer. 
    "A lot of money has been allocated into Europe in the last 
few weeks. Consumer discretionary and autos are doing very 
well," Veronika Pechlaner, European fund manager at Ashburton, 
    "People are positioning for a pick-up in growth. While that 
won't happen overnight, that'll help the domestic cyclicals, and 
there are also plays on the weak euro." 
    With over half of STOXX Europe 600  .STOXX  companies having 
reported results for the fourth quarter, 60 percent have beaten 
or met revenue expectations, Thomson Reuters Starmine data 
    Forty five percent of companies beat expectations, and 27 
percent have missed, resulting in a net beat of 18 percent - the 
biggest proportion of "beats" for 10 quarters, UBS said. 
    Quarterly revenues are still in decline overall - down 6 
percent year-on-year in the fourth quarter - and the slump in 
oil, while helpful for consumers of energy, is squeezing the oil 
and gas sector. 
    However, the likes of Danish jeweller Pandora  PNDORA.CO , 
Swedish fashion store H&M  HMb.ST  and chip-designer ARM  ARM.L  
are among the consumer and tech stocks that have posted double- 
digit year-on-year growth, ahead of market expectations.     
    This revenue performance is seen by some as a turning point 
after years of earnings doldrums in Europe, and suggests that 
companies are generating new business and not relying solely on 
cost-cutting to boost their bottom line.  
    Link to European earnings growth forecasts: 
    Earnings, or profit, growth has been absent for five years, 
and has missed expectations for four years.  
    There have been "47 months uninterrupted of earnings 
downgrades," Nick Nelson, European equity strategist at UBS, 
said, "and investors are understandably getting a little bit fed 
up with the lack of earnings growth in Europe." 
    "(However) revenues are starting to improve because things 
are stabilising in Europe. Europe is still not the engine of 
growth for most companies, but it's the European market that 
seems to be at an inflection point." 
 (Editing by Susan Fenton) 
 ((; +44 207 542 7064; Reuters 
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