Reuters LIVE MARKETS-Autos hold key to drive Europe out of...

Reuters

LIVE MARKETS-Autos hold key to drive Europe out of profit recession

* European shares up 0.4%

* Tech leads gainers

* Eyes on ECB meeting

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AUTOS HOLD KEY TO DRIVE EUROPE OUT OF PROFIT RECESSION (1007 GMT)

The Q4 reporting season will see Europe suffer another big profit drop but investors are looking beyond that as the recovery from the COVID-19 downturn is gradually taking shape in what will drive earnings into a massive turnaround.

Oct-Dec quarter is expected to be the last negative quarter for Europe Inc (-26%). In Q1 there will be a 44% profit jump followed by an even larger surge of 81% in the following quarter, according to the latest Refinitiv I/B/E/S estimates this week.

But what exactly is going to drive the region out its profit recession? Some more granular forecasts may hold the answer.

The cyclical consumer sector, which includes auto stocks, is expected to post an 3118% profit gain in Q1, by far the largest increase in the STOXX euro zone earnings, followed by industrials (643%) and financials (2017%), according to I/B/E/S.

Drilling the down to single stocks here the three main findings for that quarter:

* Daimler (1471%), Fiat Chrysler (177%) and Volkswagen (602%) are the largest contributors in cyclical consumers

* Within industrials, Airbus (356%) is the biggest

* In financials, BBVA (131%) is the largest

In the chart below you can see how auto stocks .SXAP , which have just hit a 14-month high, have recently seen their biggest earnings revisions in a decade.

(Danilo Masoni)

This and the shortages mounting up in other mineral inputs will rive many local companies through the next few years and beyond.