In a note focusing on European stocks, analysts at Barclays said the market may be tired after a strong run for cyclicals and renewed macro volatility, but earnings are not to blame.
The bank notes that first quarter earnings are beating estimates, helped by margins, with their take on the results being largely positive.
"Companies sound more constructive, financials look strong and EPS revisions are improving," wrote the bank. "Analysts look comforted by the numbers so far, with the companies turning incrementally positive on the economic outlook. Guidance has been largely neutral with relatively less upgrades/downgrades than usual as firms look ahead to an improving demand outlook and earnings recovery later in the year."
The market reaction to earnings has been positively skewed, in particular in Europe and financials, although more muted compared to recent quarters.
"As we had anticipated in our preview, the strong rally in cyclicals had pre-empted the recovery in earnings, while stagflation worries have resurfaced lately. So market fatigue in understandable, but we think earnings are not to blame for it," said Barclays.
Bank of America also released a note covering European earnings recently, stating they are "weak but improving."
"European Q1 earnings growth is running at -11% year-on-year (-15% ex-financials; -11% ex-financials and ex-energy), which, if sustained, would mean a further slowdown from the -9% growth recorded in Q4," said BofA.
"Under the surface, however, things are better than feared. The current Q1 run-rate for EPS growth is ahead of the -14% expected at the start of the season for the companies that have reported so far, resulting in a decent median EPS surprise of +3% (a strong improvement from the negative surprise in Q4) and a 4% upward revisions to Q1 EPS estimates since the start of the season (driven by a 6% upgrade to sales, the strongest in-season upgrades in more than a year)."