BRUSSELS: Europe’s vaccine campaign may be beset with delays, communication blunders and missteps, but in markets at least investors are united in wagering that the pandemic is on the way out.

Stocks in the region have vaulted back to records, and the euro capped its best week against the dollar so far this year.

A big turnaround in projected profits for corporate Europe shows a brewing recovery in the investment and consumption cycle.

Analysts are ratcheting up estimates for European miners, banks, auto makers and oil producers - all industries set to boom as the global economy roars back to health.

Upgrades now outnumber downgrades by most in over a decade, according to data from Citigroup Inc.

Whether all that enthusiasm is justified will become clearer this month, when earnings season kicks off.

Behind the bullish shift in markets is a belief that Europe will be successful in immunising the bulk of its population within a few months, and evidence that the United States and Asia are on a solid path of recovery.

From food giant Nestle SA to luxury powerhouse LVMH Moet Hennessy Louis Vuitton SE, investors are counting on Europe’s flagship names to reap windfall profits as consumers around the world come out of lockdown ready to spend.

“The market rightly anticipates accelerating earnings growth, ” said Olga Bitel, global strategist at William Blair Investment Management.

“The difference this time is magnitude. Specifically, the United States and Europe are likely to experience the mother of all recoveries over the next several years.”

The gains across European markets show sentiment is turning positive after a delayed start to immunisations and mistrust over the AstraZeneca Plc vaccine’s side effects.

Now, signs are emerging that Europe’s vaccine campaign might be getting back on track.

France met its goal of inoculating 10 million people a week ahead of schedule and Germany has doubled its pace of vaccinations.

Germany’s export-led economy is also getting a boost from the wider economic recovery, helping lift inflation expectations. The country’s 10-year breakeven rate is at 1.35%, near the highest since 2014.

Granted, European markets still look sleepy compared with elsewhere.

The euro isn’t far from its five-month low against the dollar, and there’s no sign of a speculative frenzy bubbling up anywhere in equities. Instead, the investment case for Europe is often one about valuation discounts.

The region has been so battered, whether from the pandemic, bureaucratic infighting, vaccine delays or fiscal restraint, that it doesn’t take much to spark a turnaround. And at a time when China and the United States are booming, bulls believe Europe can ride the momentum too.

To bet on the comeback story, JPMorgan Chase & Co’s equity derivatives team has told clients to buy calls on the Euro Stoxx 50 and sell them on the S&P 500.

The bank’s strategists tout Europe’s cyclical bent and relative cheapness as all reasons why stocks can keep outperforming.

Despite that optimism, there’s plenty evidence that Europe’s recovery is still on shaky ground.

Concern over rare blood clots linked to AstraZeneca shot has held back vaccination efforts. There’s also growing alarm about a potentially long delay before money from Europe’s €750bil (US$892bil or RM3.7 trillion) recovery fund reaches crisis-hit countries.

For now, all eyes are on consumer spending.

In the UK, shops, gyms and hairdressers reopened yesterday, and the summer months will be a litmus test if shoppers are ready to splash out on holidays and new clothes.

Airlines and mall owners have already soared from investors betting normal life can quickly return.

Bonds of EasyJet Plc and UK property manager Hammerson Plc are among the best performers in Europe this year.

“As long as the vaccine rollout continues to progress, we would expect to see consumers start to spend, ” said Niall Gallagher, an investment director of European equities at GAM Investments.

 - Bloomberg