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Looking for upside in Europe

Consumer discretionary, consumer staples and telcos have the best prospects as profit margins recover in that part of the world

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The big difference in profit margins between the euro area and the US - 4% versus over 9% - explains much of the current earnings gap, with EPS at 30% below trend in Europe and 10% above trend in the US.

AT 4 PER CENT, profit margins in the euro area are still close to levels consistent with recession, but they stand at historical highs of above 9 per cent in the US. This big difference explains much of the earnings gap, with earnings per share (EPS) currently 30 per cent below trend in the euro