LIVE MARKETS-When might the euro's rise bring pain to earnings?

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WHEN COULD THE EURO'S RISE HURT EARNINGS?

The euro's EUR=EBS rapid rise could threaten Europe's corporate earnings recovery should it accelerate, but companies should be able to absorb the impact for now, according to Pictet Asset Management.

With Europe's earnings season drawing to a close, over 70% of companies have beaten revenue expectations, well above a typical quarter when about 58% beat revenue estimates, LSEG I/B/E/S says.

Some of that has been attributed to the weaker euro, with the STOXX 600 only generating about 40% of its revenue from Europe, according to a recent note from Goldman Sachs.

And the single currency now trades above $1.0850, is up over 7% from its intraday low in early February and last week saw its biggest weekly jump since 2009.

Bank of America believes the euro could go "much higher" and recently revised its forecast to $1.15 for this year.

"There's no question that's a negative for earnings," said Luca Paolini, chief strategist at Pictet Asset Management.

"You can say that it (the euro) was a big boost to earnings until recently, but now it's neutral."

Still, Paolini added that the pass through of the stronger euro to earnings will likely take time, given that the cyclical low for the euro was only in January and it remains below its level from a year ago.

The expected boost to growth from Germany's fiscal reforms could also offset any negative impact from the stronger currency, he added.

"If the European economy recovers, the impact of higher growth will more than offset the negative impact of the euro, unless the euro goes to $1.20," he says.

"If you get to $1.15 you will probably start to feel it, until then I doubt it."

(Samuel Indyk)

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