JPMorgan: Falling Oil Prices Weaken European Stock Earnings Momentum, May Underperform U.S. and Emerging Markets in H2
N.R. Finch
JPMorgan warns that falling oil prices are eating into European energy-sector earnings, and European equities may keep trailing the US and emerging markets in H2 — a notably cautious stance as Goldman Sachs and Barclays turn more bullish on the region.
How much has oil dropped, and why does Europe care so much?
Brent crude fell roughly 8% last week and traded below $80 a barrel on Monday morning — though it remains more than 13% above pre-Iran-war levels.
JPMorgan EMEA equity strategist Nataliia Lipikhina warned plainly: if oil stays here or drops further, energy-sector earnings face downgrades that could spill into the broader market.
This means → European equities are far more oil-sensitive than US stocks. Energy is a key earnings pillar for the region; when oil falls, that pillar wobbles.
Europe just hit a record high — why is JPMorgan bearish?
The Stoxx Europe 600 erased all war-related losses last week and reached a record high, as the market simultaneously repriced geopolitical risk, energy-risk assumptions, and cyclical support.
Lipikhina argues the next leg up must come from fundamentals, not from the valuation re-rating driven by easing geopolitical tension — the market has already priced in strong earnings expansion.
In plain terms = the recent rally came from "bad news fading." The next move requires "good news delivering." Any earnings miss challenges the case for overweighting Europe.
Is the UK market even more exposed?
Bloomberg Intelligence strategists Laurent Douillet and Simbarashe Gumbo flagged that the FTSE 100's 18% earnings-growth forecast for this year is at risk.
The index's heavy commodity exposure makes it especially sensitive to oil-price swings.
This means → if oil keeps falling, the UK large-cap benchmark could take a more direct hit than continental Europe.
What does JPMorgan actually like right now?
Sector picks: still bullish on AI-linked themes — tech, semiconductors, and industrials benefiting from global infrastructure spending.
Potential catch-up plays after recent underperformance: luxury goods and civil aerospace.
Regional preference: maintains a tilt toward US and emerging-market equities, citing more certain earnings-growth trajectories.
Where does JPMorgan diverge from other banks?
Goldman Sachs, Barclays, and others have recently raised their European equity return forecasts, standing in sharp contrast to JPMorgan's caution.
This reflects a growing crack in how the Street reads the same events: bulls see geopolitical de-escalation plus valuation repair; bears see uncertain earnings delivery.
In plain terms = the major banks are now on opposite sides of the question "Is Europe still worth chasing?"
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