LIVE MARKETS-Internationals vs. domestics: watch the euro

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INTERNATIONALS VS. DOMESTICS: WATCH THE EURO

The pan-European STOXX 600 .STOXX has meandered sideways since rebounding from Trump's tariff wobble in April, but performance underneath the surface has been divided.

Citi equity strategist David Groman notes that domestically oriented stocks have meaningfully outperformed more internationally exposed peers year-to-date, driven by the strong euro, which has risen almost 14% against the dollar this year.

"We have previously estimated that a 10% rise EURUSD is associated with a c2% fall in European earnings," Groman writes.

"FX strength is therefore responsible for a sizable share of European EPS downgrades."

Citi's FX strategists believe the euro will gain slightly over the next quarter, but foresee limited upside for the single currency next year, which Groman says could set the stage for improving EPS trends among companies with international exposure.

In the near-term, Citi believes there may be headwinds for international EPS and relative performance, but with scope for improvement in the not-so-distant future.

"A bottoming out in downward EPS momentum for international stocks will be key," Groman says.

More broadly, Citi remains overweight European stocks, targeting about 5%-10% upside to the middle of next year.

(Samuel Indyk)

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EARLIER ON LIVE MARKETS:

EUROPE OPENS LOWER, POWELL COMMENTS WEIGH CLICK HERE

BEFORE THE BELL: FUTURES DOWN AFTER POWELL'S CAUTIOUS TONE CLICK HERE

'TIS THE SEASON TO BE CHOPPY CLICK HERE