Jan 15 (Reuters) – European corporate earnings are set to decline in the fourth quarter, the latest forecasts showed on Thursday, as geopolitical uncertainty mounts and the market awaits a decision from the U.S. Supreme Court on the legality of President Donald Trump's tariffs. European firms are expected to report a 4.1% drop in 2025 fourth-quarter earnings, on average, according to LSEG I/B/E/S data, worse than the 3.9% decrease analysts expected a week ago. That would be the worst earnings performance in the past seven quarters. WHY IT MATTERS As Europe reels from sluggish growth prospects and a more uncertain trade environment, the Supreme Court's ruling could have far-reaching consequences for the global economy if it overturns a wide array of tariffs imposed by U.S. President Donald Trump. Though European investors seem negative towards the upcoming results season, they have pushed bourses to records, with the FTSE , DAX and STOXX indexes recently hitting their highest levels ever. Revenues are also expected to shrink 2.9% compared to last year, according to the LSEG data. That is worse than the 2.6% fall expected last week. CONTEXT Meanwhile, earnings of U.S. companies are forecast to significantly outperform European ones with S&P 500 companies expected to deliver 8.8% average earnings growth, according to a different LSEG I/B/E/S report published on Friday. Early forecasts are not always good predictors of the end result. For months, investors expected unremarkable or even negative growth for 2025’s third-quarter results, but STOXX 600 companies ended up delivering 7.3% year-on-year earnings growth in the quarter. (Reporting by Javi West Larrañaga; Editing by Matt Scuffham)
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