Europe Weekly Kickstart A Stronger Earnings Story

Portfolio Strategy Research 14 August 2026 | 11:53AM BST

We raise our expectations for European equities. Strong stocks and other value-oriented, asset-heavy sectors. Sharon Bell | first-half results and a resilient economic backdrop lead us Moreover, we have seen a marked improvement in Goldman Sachs International to upgrade our FY 2026 STOXX 600 EPS growth forecast to European ROE, which is second only to the US (Exhibit 3). Peter Oppenheimer 15%, from 10%. We also roll forward and raise our price | Chinese competition is a significant economic issue but targets for Europe; we now expect 695 for SXXP over 12m, Goldman Sachs International a more limited index risk. German Autos and chemicals Guillaume Jaisson 9% total (previous target 660) (Exhibit 7). | face substantial pressure from Chinese manufacturing, but Goldman Sachs International Earnings momentum is improving. First-half 2026 earnings Autos account for only around 1% of European market growth is tracking at 15% year-on-year (Exhibit 1), the capitalisation (Exhibit 4). Larger index sectors, including Elena Porfidia | strongest pace in three years. Commodities have been a big Financials, Healthcare, Energy, Utilities, Telecoms, Goldman Sachs International

contributor, but this recovery is broader than the sector Aerospace and Defence, are generally less directly exposed Jacinta Feng | itself: excluding Commodities, earnings growth is around to low-cost Chinese imports. Goldman Sachs International 8%, supported by improved margins, stronger bank Energy shocks and weak domestic growth do not profitability, buybacks, and exposure to investment themes necessarily translate into weaker earnings. Higher energy such as defence, infrastructure, electrification, and data prices can support Energy, Utilities, Basic Resources, centres. Chemicals and Financials earnings. For other sectors such Europe’s recent relative performance has been stronger as Telecoms, Media and Healthcare the impact is close to than its reputation suggests. Since 2022, European Banks zero. That said, prolonged shocks could ultimately hurt (SX7P) have materially outperformed US mega-cap demand and consumer margins making Consumer technology (Exhibit 2). Despite the tariff shock and energy Discretionary stocks most vulnerable to the energy shock supply crisis, the STOXX 600 has also outperformed the S&P (Exhibit 5). In addition, only around 40% of STOXX 600 500 since the start of 2025. Higher US starting valuations, revenues come from Europe, making global growth, pricing the benefit of higher rates for European banks, and a shift in power and commodity prices more important than regional demand for infrastructure have benefited Europe’s HALO GDP alone.

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Goldman Sachs Europe Weekly Kickstart

Attractive valuations vs. structural challenges. European equities remain cheaper than US peers even across comparable growth categories, and crucially in a world seeking capital, European companies offer high dividends and buybacks to investors. That said, risks are twofold: (i) a more prolonged energy shock – especially when gas storage is low – could mean much higher prices and a large impact on the consumer and (ii) investors will move attention to political risks given a number of elections in 2027.