What traders are watching this earnings season in Europe

The answer will set the tone for the direction of European equities in the months ahead. The fourth-quarter earnings season begins at the heels of stocks’ best start to the year since 2013 and amid the broadest eurozone expansion in almost two decades. Strategists say the stronger economy and recovering commodity prices open the door to positive surprises, though caution that a rising euro could damp numbers for some exporters.

"There has been a feeling that earnings in Europe have been disconnected from the top-down, macro story for a while," Emmanuel Cau, an equity strategist at JPMorgan Chase & Co, said by phone. "People need to see that earnings are finally rebounding in Europe consistent with the pick-up in activity. Macro could again become the most important driver going forward."