Must Read Research: Earnings; European Energy Markets; Memory Demand; MSCI EM Reshuffle
The desk interprets the recent insights from BofA Global Research as indicative of a more cautious market amid strong earnings, particularly in the U.S. equity space, while European energy markets face critical challenges. Per the full note, the second quarter’s EPS growth of 30% suggests robust corporate health, yet the market's muted reaction highlights a shift in investor expectations. Continued volatility in European energy needs to be monitored closely, particularly as temperatures soar, pushing demand for power upwards. As the earnings momentum wanes in the third quarter, the outlook reflects an increasing dependency on factors influencing both corporate earnings and broader market sentiment.
What the desk is arguing
The desk frames the current earnings season as potentially running out of steam, illustrated by the impressive yet insufficiently rewarded EPS growth rate of 30%, as noted in BofA’s analysis. With 76% of S&P 500 companies exceeding EPS expectations, the stock market's response suggests that while earnings growth is significant, investors are seeking more than just strength; they want acceleration.
In parallel, European energy markets are under strain, grappling with extreme weather conditions that are elevating power consumption to levels not seen since the onset of the Ukraine conflict. With critical energy supplies facing constraints due to drought, the market is likely to remain sensitive to energy pricing and geopolitical developments.
Where it sits in our coverage
Our consensus target for the EUR/USD pair is currently set at 1.075, reflecting a moderate outlook considering current conditions. Notably, jpmorgan has a target of 1.10, indicating an alignment with a cautiously optimistic view, while bofa sees it at 1.04, opposing this trend.
The desk's perspective aligns closely with jpmorgan, indicating that we are at the higher end of projections. A significant divergence in views largely stems from the uncertain trajectory of earnings and energy costs that could shape currency flows.
How other firms see it
The sentiment around earnings is somewhat unified among aligned firms like jpmorgan, which expect stable growth, contrasting with more conservative assessments from bofa that suggest a bearish tilt. This divide indicates broader market uncertainty, with jpmorgan projecting sustained growth while bofa anticipates a setback based on external shocks.
For those trading in the EUR/USD, ongoing fluctuations in energy prices will be critical to monitor, reflecting the broader impact of European market dynamics and U.S. labor market updates.
What the calendar says
There are currently no high-impact events on the immediate calendar that could potentially steer market directions ahead, making it essential for traders to remain vigilant in tracking developments in earnings and energy markets in the interim.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01U.S. EPS growth at 30% signals robust corporate performance but less market enthusiasm.
- 02European energy market faces turmoil due to record temperatures and limited supply.
- 03The divergence in expectations among firms highlights the uncertainty in the market outlook.
- 04Upcoming earnings releases might add pressure or clarity to current market sentiment.
Market implications
Traders should watch for movements around 1.075 in the EUR/USD, gauging reaction to global earnings updates and energy market fluctuations. A robust earnings report could strengthen the Euro, while continued volatility in energy might pressure it downwards.
Risks to this view
A resurgence in inflation or an unexpected shift in the energy supply-demand balance could undermine the bullish outlook on earnings and pressure the Euro significantly. Additionally, geopolitical tensions could further complicate trading dynamics.
Hello, and welcome to Must Read Research on B of A Global Research Unlocked. In this podcast, we offer quick summaries from the prior week's most interesting and impactful research. I'm Candace Browning, Head of Global Research at B of A Securities, and we're recording this episode on Monday, August 10th, 2026.
It's been a summer of extremes. This week, we highlight EPS growth extending its hot streak, rising European energy market risks amid record temperatures, growing AI memory demand following a landmark U.S. listing, and an emerging markets index reshuffle with the potential to redirect billions in investor flows. Let's begin with earnings season, where strong results continue to come in, but the market appears increasingly difficult to impress.
With nearly 90% of S&P 500 results in, our U.S. equity strategy team has second quarter EPS tracking 30% growth year over year, and that excludes Alphabet and Amazon investment gains. That's a 76% EPS beat rate, matching the strongest level since 2021. Breadth is also unusually strong, 81% of stocks and 10 of 11 sectors are on pace for positive year over year growth, a 94th percentile breadth reading.
AI remains the standout with median EPS growth of 28% versus 12% for non-AI related stocks, though consensus expects AI growth to slow to 16% next quarter. That helps explain the weaker price reactions, as companies beating both EPS and sales are being rewarded at only about half the historical average. EPS growth is expected to stay above 20% through the fourth quarter, a four quarter streak seen only 10 times since 1936.
But investors may demand acceleration, not just strength. From earnings momentum, let's turn to another market feeling the effects of extreme conditions, and that's Europe's energy market. Europe is experiencing its hottest summer in at least 15 years, driving power usage to the highest level since the start of the Ukraine war, while drought has limited hydro and nuclear supply.
Nuclear output is at record levels due to low cloud cover and wind has benefited as well. Dependence on weather driven power sources has increased price volatility and reduced advantages historically enjoyed by nuclear producing countries, such as France. Natural gas fire generation is able to ramp as renewables fluctuate intraday.
We are raising our Europe gas or TTF forecast on low European inventory with spike risks above 80 euros per megawatt hour if the strait is not reliably opened by winter. Power vagaries impact AI planning too, and after hosting more than 20 speakers and 10 events on the topic, the thematic research team suggests that economics are shifting in favor of solar and batteries, where prices are falling below those of new coal and nuclear projects. From the energy needed to power the next generation of technology, let's turn to rising hyperscaler spend and its impact on memory demand.
Sources & References
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