Europe Inc's recession expected to deepen as Q3 earnings outlook dims

Europe's corporate recession is expected to deepen, the latest forecasts show, as companies struggle with uncertainties from Brexit, the protracted US-China trade spat and Germany's manufacturing recession.

Companies listed on the STOXX 600 regional index are now expected to report a drop of as much as 3.7% in third-quarter earnings, worse than the 3% fall expected a week ago, I/B/E/S data from Refinitiv showed.

Earnings that grew by 14.4% in the same quarter a year earlier are seen posting their worst EPS since Q3 2016 when earnings fell 5%.

Consensus for revenue improved slightly with forecasts for flat growth, compared with a fall of 0.3% seen last week. Revenue rose 5.9% a year ago and grew by 3.3% in Q2.

Excluding the energy sector, Q3 earnings are expected to fall just 0.3% with revenue increasing 3.1%, the data showed.

As the global economy falters, investors have braced for a tough earnings season, which kicks off in earnest next week and will test the stock market's stellar rally this year.

The pan European STOXX 600 index is up 16.6% this year.

Companies in the region have been in an earnings recession since the second quarter when earnings fell 2.1%, posting their second straight quarterly fall. About 80 companies are due to report next week.

Q4 forecasts were reined in, I/B/E/S data from Refinitiv showed, with EPS expected to grow 9.1%, down from 9.6% last week, and revenue seen growing by 3.2%, down from 3.4% last week.