A string of Europe's largest firms issued surprisingly upbeat profit reports on Thursday, bolstering an abrupt renewal of investor confidence in the region after months of debt turmoil and fears for the euro.
Broader economic data added to the theme, following some startlingly strong numbers last week -- euro zone economic sentiment rose strongly in July and German unemployment fell to its lowest level since November 2008.
Economists said the underlying performance in the region as a whole was never quite as bad as suggested by incessant news of debt default dangers in Greece and other southern European economies badly bruised by the recession of 2008-2009.
But they also cautioned that the abrupt swing toward a more positive mood did not change the fact that the region's economy is likely to heal only slowly with harsh government austerity measures poised to bite in the months ahead.
On the day, the upbeat news from some of Europe's biggest companies was nonetheless impressive and came on the heels of surveys last week which showed an unexpectedly high level of growth in both the manufacturing and services sectors in the region.
Publicis , the world's third-largest advertising group in terms of revenues, posted better-than-expected profit figures for the first half, declared its outlook better than previously envisaged, and the company's boss went as far as to declare the bad times over.
We really have the feeling of being at the end of economic crisis, or even having put it completely behind us, Publicis CEO Maurice Levy told reporters.
His remarks were not isolated.
Dutch staffing firm Randstad , second largest in the world in its field, said it was not seeing signs of a double dip in the economy, with companies continuing to hire more staff, notably in Germany and France.
We are seeing growth everywhere. Even in Greece we are seeing the usual pattern. We are not seeing signs of a second dip, Randstad Chief Financial Officer Robert-Jan van de Kraats told Reuters.
Europe's debt market crisis spilled out of Greece late last year when markets took fright at the size of the country's deficit and ballooning debt, knocking the euro and European assets as investors started to fret about the risk of debt default in the region.
Drugs and engineering giants gave good readouts too.
France's Sanofi-Aventis beat second-quarter earnings expectations, AstraZeneca posted strong results and German chemicals maker BASF surpassed analysts' earnings expectations for the sixth straight quarter, bolstered by a rebound in the car and electronics industries.
German engineering conglomerate Siemens posted a better-than-expected 40 percent rise in fiscal third-quarter operating profit, helped by cost cuts and the export fillip from a weaker euro, an exchange rate advantage ironically spawned by the debt crisis and investor fears that at some stages fueled questions about the very survival of the common currency.
All that is fuelling a positive mood among investors as the European region also benefits from the fact that investors are less convinced than before about the strength of the U.S. economy's recovery, following a string of somewhat disappointing news on that front in recent weeks.
Investment bank UBS, where economists have long argued that investors were perhaps overly negative about the fiscal woes of the region, published a note that captured the shift in mood as far as they see it.
Today our Global Strategy team upgraded Europe to Neutral (from Underweight) as they position their portfolio for a more positive tone, said the note.
We continue to promote Europe on compelling valuations, economic data and relief for the banks to boot, UBS said, noting that Germany's Ifo index of business sentiment registered its biggest leap in 20 years in July, British second-quarter GDP was much stronger than expected and the fact that stress tests on banks across the region had proven mostly reassuring.
NOT SO FAST
At Deutsche Bank, however, economist Gilles Moec warned against getting carried away.
There's no big change in terms of the underlying macro picture: we're in for slow growth, said Moec.
After poor first-quarter GDP figures in much of Europe, the second-quarter is expected to be stronger by definition more than as a result of any major upswing, and government stimulus deployed to combat the recession is still in place, with much of the post-recession austerity yet to come.
What is really impressive is the speed at which investors' focus has shifted away from hammering Europe to having a more sober look at the U.S., said Moec.
(Editing by Mike Peacock)