What's going on?

Analysts are expecting to see a huge uptick in European companies� earnings last quarter � especially now that frivolous nice-to-haves have become the new must-haves.

What does this mean?

US earnings season officially arrived last week, and now Europe�s companies are set to start sharing how they got on last quarter too. Not all of them, mind you: public European firms aren�t obliged to publish quarterly statements like their American counterparts are, and only 60% of them are coming clean.

Still, hopes are high for those of them that are: analysts � encouraged by improvements in economic growth � have upped their earnings expectations by almost 20% over the last three months. That�s their biggest adjustment in two decades, and it�s not the only bold call they�ve made: they�re also forecasting firms will post 55% higher profits on average than the same time last year.

Why should I care?

For markets: Show yourself out, healthcare.

Much like Stateside, consumer discretionary companies � which sell things people want but don�t really need � are expected to see the biggest boost, with shoppers looking for something, anything to spend their cash on. Healthcare companies, meanwhile, are the only ones expected to see their earnings drop compared to the same time last year � probably because they were one of few sectors doing well back then.

The bigger picture: It�s a trap.

Between all-time high stock markets and the promise of a spectacular earnings rebound, investors are feeling remarkably optimistic. That�s not necessarily a good thing, though: it means earnings updates are far less likely to surprise and far more likely to disappoint. And now that this sky-high optimism�s been �priced in� to the wider stock market, enough disappointments could cause a lot of damage�