With the impact of the depreciation of the US dollar, many companies have been sounding the alarm on profit warnings frequently.

In the current earnings season, rising tariffs and a weak US dollar are casting a shadow over corporate profit expectations, with analysts predicting that the negative impact will continue to expand over the next few quarters. With the US dollar falling to a three-year low against the euro and hitting a ten-year low against the Swiss franc, European companies have sounded the alarm. This has further pressured the stock market, which was already at risk of economic slowdown due to Trump's trade policies. Given that 60% of revenue of the companies in the Stoxx 600 index comes from overseas, a significant devaluation of the US dollar will significantly reduce their US market earnings when valued in local European currencies. As a result, European stocks with significant exposure to the US market have declined in tandem with the US dollar, with many investors turning to domestically-oriented companies for safety. Europe's largest company, SAP SE (SAP.US), has issued a warning about currency risks. The software giant's CFO told investors that the weakening US dollar will create profit headwinds in the medium term, and as currency hedging contracts mature, the negative impact will be more pronounced next year. Meanwhile, Dutch beer giant Heineken Group (HEINY.US) expects a decrease in revenue of 1.72 billion euros (2 billion US dollars) due to a stronger euro this year. French medical diagnostics company BioMerieux and UK retailer WH Smith Plc also highlighted currency risks in their earnings reports. Florian Ielpo, Head of Macro Research at Lombard Odier Investment Managers, stated: "European companies must realize that their price competitiveness can no longer rely on a strong dollar." Ielpo predicts that while the current earnings season has not yet reflected the impact of the new tariffs as of April 2, the third quarter will be the center of the storm. Furthermore, analysts expect that the trade war will accelerate the devaluation of the US dollar and may lead to an economic recession in the US. This has caused the S&P 500 index to drop 8.6% year-to-date and has largely dampened the rise of European stock markets this year. Morgan Stanley strategists estimate that a 5% increase in the euro and other local currencies against the US dollar will reduce the earnings growth of MSCI Europe Index components by 1.5 to 2 percentage points, calling the exchange rate movements a "comprehensive drag." Early impacts on the US market The impact of exchange rate movements on US companies has not yet fully materialized: in the first quarter, the US dollar was still higher against the euro than the same period last year. However, with the rapid depreciation of the US dollar, sales in the second half of the year may come under pressure. Some analysts predict that the euro will drop from the current 1.14 to 1.20 against the US dollar. For US companies with a high proportion of overseas business, a weaker US dollar is a positive development. Stocks of companies such as Coca-Cola Company (KO.US) and Philip Morris International Inc. (PM.US) with significant revenues from overseas have risen this month. However, UBS Group AG strategists point out that only one third of the S&P 500 index components have revenues coming from overseas, and for companies like Walmart Inc. (WMT.US) that are mainly focused on domestic demand, a weaker US dollar usually means increased import costs and diminished consumer purchasing power, which is negative. Bloomberg Intelligence analysts George Ferguson and Melissa Balzano specifically mention American Airlines Group Inc., stating that as the euro weakens against the US dollar, profits from lucrative transatlantic routes may decline. They added: "Soft demand may start to show as early as the third quarter, with some travelers cutting vacation plans due to the stronger dollar, and trade disputes may prompt European tourists to choose destinations outside the US." Collective downgrades of profit expectations With deteriorating economic prospects, strategists are collectively lowering full-year profit forecasts. Data from Bloomberg Intelligence shows that earnings growth expectations for S&P 500 index components have dropped from 11.4% at the beginning of the year to 7.3%. Meanwhile, Barclays PLC Sponsored ADR strategists have lowered earnings growth expectations for Stoxx 600 index components from 3% in January to -2%. Currency factors have also triggered intensive downward revisions of profit expectations for European export-oriented industries. For example, due to the depreciation of the US dollar against the Swiss franc, Vontobel has lowered profit expectations for CF Richemont Group (CFRUY.US), Swatch Group AG (SWAGY.US), and Lindt & Spruengli AG (CHLSY.US). Bank of America Corp has reduced profit growth forecasts by 2% for German cosmetics manufacturer Beiersdorf AG (BDRFY.US), while Barclays PLC Sponsored ADR has lowered profit growth forecasts for Unilever PLC Sponsored ADR (UL.US), Nestle (NSRGY.US), and Lindt. Jacob Falkencrone, Global Head of Investment Strategy at Nordea Bank, told clients in a report: "Focus on domestically-driven companies. European exporters must cope with a strong euro eroding profits and tariffs pressure." Over the next two weeks, companies accounting for six tenths of the S&P 500 index weight, including Microsoft Corporation (MSFT.US) and Eli Lilly (LLY.US), will be releasing their earnings. BNP Paribas noted that Accenture Plc Class A (ACN.US), Alphabet Inc. Class C (GOOGL.US), and Microsoft corporations will be particularly impactful.Corporations and other businesses have non-dollar revenue exceeding 50%, these multinational companies may benefit from the depreciation of the dollar.However, many investors still maintain a cautious attitude, warning that the trade war initiated by Trump may suppress global demand for goods and services. "American exporters should benefit from the weakening dollar, but they may be trapped by tariffs and anti-American sentiment," said James Athey, fund manager at Marlborough Investment Management Ltd. "I think it is currently difficult to find investment targets with significantly improved profit prospects."