Citi's Manthey Talks EU Budget Negotiations

Summary

---

Podcast Summary: Citi's Mantheus Talks EU Budget Negotiations

Podcast: Bloomberg Talks
Date: July 17, 2026
Guest: Beata Mantheus, Head of European Equity Strategy at Citi
Host: Bloomberg
Topic: European earnings season, AI impact, global investment flows, and EU budget negotiations

---

Episode Overview

In this episode, Beata Mantheus from Citi joins Bloomberg to unpack the European earnings season, discuss the impacts of AI hype and global volatility, and offer an insider’s perspective on the ongoing EU budget negotiations. Mantheus highlights reasons for optimism in European equities, outlines sectoral performance trends, and explains why the next EU budget cycle is critical for shaping policy and competitiveness across the continent.

---

Key Discussion Points & Insights

1. AI and European Earnings Season

[00:38-03:41]

• Limited Direct AI Exposure:
  Unlike the US, European markets have less direct exposure to AI via tech stocks. However, sectors like basic resources and broader industrials are linked indirectly and have faced pressure amidst global AI-driven market shifts.

• Recent Outperformance:
  Europe’s relative insulation from AI volatility has led to outperformance in recent weeks, with many markets reaching all-time highs.

• Earnings Revision Positivity:
  Mantheus points to a “very encouraging” trend in analyst upgrades for European equities across multiple dimensions:

  • Magnitude: Revisions have hit near all-time high levels.
  • Breadth: “80% of sectors” (19 of 24) are seeing earnings upgrades, a positive signal for cyclical outperformance.
  • Timing: Upgrades are occurring despite negative seasonal trends—historically, this leads to further upgrades in the coming months.

  Quote:
  “Earnings revisions in Europe this week have hit almost all-time highs… 80% of sectors… are seeing upgrades.”
  (Beata Mantheus, 02:19)

• Historical Edge:
  “When [upgrades] happen against negative seasonality trends, historically it’s been a good lead on upgrades continuing over three to six months… 90% hit ratio.”
  (Beata Mantheus, 03:20)

---

2. Attracting Global Investment into Europe

[03:41-05:28]

• Constructive, but Selective View:
  While Mantheus is constructive on Europe as well as global cyclicals (with Japan rated “overweight”), she notes the need for selectivity due to sector divergences (e.g., exporters to China see headwinds, banks show upside potential).

• Policy/Regulatory Tailwinds:
  The forthcoming EU seven-year budget is a critical long-term factor. Mantheus is watching for “By European” policies (i.e., government preference for domestic firms) and regulatory changes to support Europe’s independence in supply chains, energy, and AI.

  Quote:
  “My eyes are on the European next seven year budget… are we going to see any regulatory changes in this respect? Or perhaps, we've been speaking about that in the past – by European.”
  (Beata Mantheus, 04:44)

• Gradual Progress:
  “This fiscal and these type of regulatory changes, it's happening slowly, but it's happening.”
  (Beata Mantheus, 05:12)

---

3. EU Budget Negotiations – Key Watchpoints

[05:28-06:24]

• Complex Allocation Debates:
  Mantheus points out that negotiations are complex, with countries prioritizing different areas: farming, regional funding, or competitiveness.

• Strategic Independence Focus:
  Priority outcomes include moves towards “energy security, national security, supply chain security, AI security”—all seen as critical to Europe’s long-term stability and value proposition for investors.

  Quote:
  “For me, this by European and a drive for Europe to be more independent… whether it’s energy security, national security, supply chain security, AI security, these are all things that we are looking out for.”
  (Beata Mantheus, 05:56)

---

4. Sector-Level Perspectives & Stock Reactions

[06:24-06:42]

• Caution on China-Linked Sectors:
  Mantheus remains cautious on sectors with large exposure to China, particularly autos, luxury goods, and certain consumer product companies.

• Positive Signs for Select Companies:
  Despite a multi-year streak of downgrades in luxury goods, some companies are showing improvement, though a sustained turnaround remains uncertain.

  Quote:
  “When it comes to luxury goods… we are still quite cautious on sectors or companies that have big exposure… to China.”
  (Beata Mantheus, 06:42)

---

Notable Quotes and Moments

• On Earnings Outlook:
  “Markets are up 10% globally. Some pause was due and now we have to step back… what are the next six months… going to look like?”
  (Beata Mantheus, 01:32)

• On Regulatory Change:
  “Will the government have levels that they will need to buy from the European companies, which would be very positive as well.”
  (Beata Mantheus, 04:55)

• On Budget Negotiations:
  “Every country has different priorities. But for me this by European and a drive for Europe to be more independent… these are all things we are looking out for and we'll hear about them for sure. The question is what the outcome is going to be.”
  (Beata Mantheus, 05:50)

• On Sector Rotations:
  “Autos still underweight, luxury goods, consumer products where luxury goods are is still an underweight for us. However, you know there are… signs of improvement in… selective names… the question is, is it now?”
  (Beata Mantheus, 06:42)

---

Timestamps for Important Segments

| Segment | Timestamp | |-------------------------------------------|-------------| | AI’s Market Impact & Earnings Outperformance | 01:02–03:41 | | Attracting Global Investors to Europe | 03:41–05:28 | | EU Budget Negotiations & Key Priorities | 05:28–06:24 | | Sector-Level Reactions & Stock Insights | 06:24–06:42 |

---

Tone & Style

Beata Mantheus delivers her analysis in a measured, data-driven tone, remaining optimistic but pragmatically focuses on nuanced sector-level trends and policy developments. The discussion is technical yet clearly articulated for a broad financial audience.

---

Transcript

[IBM Representative]

So there's a lot of noise about AI, but time's too tight for more promises. So let's talk about results. At IBM, we work with our employees to integrate technology right into the systems they need. Now a Global workforce of 300,000 can use AI to fill their HR questions. Resolving 94% of common questions, not noise Proof of how we can help companies get smarter by putting AI where it actually pays off, deep in the work that moves the business. Let's create smarter business IBM,

[Beata Mantheus]

Bloomberg Audio

[Podcast/Radio Host]

Studios Podcasts, Radio news European earnings are

[Interviewer/Host]

starting to flow in as global markets are being dominated by the swings in the AI trade and the uncertainty created by the Iran war. Let's discuss now. Beata Mantheus, head of European Equity Strategy at Citi Bjata Good morning. Good to have you back with us on the AI story. How do you see that playing out in earnings season in Europe? Are there consequences evident beyond those few tech names that are based here?

[Beata Mantheus]

Absolutely. So European equity market doesn't have that much exposure via tech to a story. This is why actually in the past few weeks when AI worries have been playing out through the market, it has outperformed. Right. But it does have links to this broader build out of AI via basic resources. So you can see these stocks being under pressure or broader industrial base as well. Right. So. So this is something to bear in mind now from our perspect given the market has done so well. Most of the markets are hitting all time highs despite all the worries and problems we've had in the first half. Markets are up 10% globally. Some polls was due, right. And now we have to step back and this is where the reporting season comes handy to step back, step back and think what is, what are the next six months or the second half of the year is going to look like. And of course our eyes have to be on earnings and on the reporting season. Now what I have to say on Europe, I am really encouraged by what we are seeing in the earnings revision trends. So the direction of the analyst forecasts and to some it's not very intuitive and it's actually happening on many fronts. So there are three dimensions of surprises in terms of positivity of it. Number one is the size. Actually earnings revisions in Europe this week have hit almost all time highs. Handful of times it's been higher. So perhaps from this level it's hard to as it is a very high level, it's hard to see them improving. But when I look underneath the surface we have the second dimension breadth of these earnings revisions 80% of sectors on level two. So out of 24 sectors in Europe are seeing upgrades. And very similar story is happening in the broader set of sectors in other regions around the world. So this type of broadening tends to be very conducive or elite on cyclical outperformance. And the third one, really very important, the last dimension, timing. All these upgrades are happening against negative seasonality trends. When that happens, historically it's been a good lead on upgrades continuing over three to six months. So actually with 90% heat ratio, 10% of the time it didn't happen, but 90% of the time upgrades continued. So that's quite encouraging.

[Interviewer/Host]

Okay, so you're encouraged on Europe. You're thinking about AI and the volatility and also the, the huge stock volumes that we've seen in terms of that trade look. I wonder what more needs to happen though actually to attract that global investor into European businesses. If you say that the outlook is so bright. I mean, I was reading just this morning about Takaichi over in Japan. This does seem to be taking shape, this idea of investing more into domestic assets. I mean, is this kind of, you know, something that we've talked about a lot for Europe, for the uk? Do you think there'll be any similar policy, you know, to come in that sense, you know, to try to drive that more positive story in Europe?

[Beata Mantheus]

Absolutely. So it is a constructive view on Europe, but it's a constructive view on global cyclicals as well. So Japan for us is actually an overweight. Continental Europe is a neutral. So we, so we see some sectors having headwinds like exporters to China, while others, like banks for example, are seeing very, very good upside. So to be selective, but large set of sectors is doing well and could continue to do well. My eyes are on the European next seven year budget. So that's a longer term story. It's being negotiated this year, it's going to be approved next year. So are we going to see any regulatory changes in this respect? Or perhaps we've been speaking about that in the past by European. Right. So will the government have levels that they will need to buy from the European companies, which would be very positive as well. So this fiscal and these type of regulatory changes, it's happening slowly, but it's happening.

[Interviewer/Host]

It's still a tailwind on the European budget. I do wonder what I suppose would be the most positive for markets because I mean you're talking about the fight currently being over things like allocation between what goes to farming, what goes to other regional funding as well and what could be extracted for competitiveness funding as well. I mean what elements of the budget negotiations are you watching most closely?

[Beata Mantheus]

Yes, it's going to be quite a volatile rise because of course every country has different priorities. But for me this by European and a drive for Europe to be more independent. From any perspective, whether it's energy security, whether it's national security, supply chain security, AI security, these are all things that we are looking out for and we'll hear about them for sure. The question is what the outcome is going to be.

[Interviewer/Host]

Yeah. In terms of what you're expecting for the rest of the earnings season you say is quite it is very positive. I mean Burberry not so great this morning. What are the individual stocks that you pick out in terms of the reaction to the ones that we've already had in Europe?

[Beata Mantheus]

So when it comes to luxury goods, as I've mentioned, we are still quite cautious on sectors or companies that have big exposure. From China. Yes, to China. Right. So autos still underweight luxury goods, consumer products where luxury goods are is still an underweight for us. However, you know there are some companies are you are seeing some signs of improvement in in selective names. Right. So it's something we are watching very closely. And of course that's the sector that has been seeing downgrades for the last two, three years. So it will end eventually. The question is, is it now?

[Podcast/Radio Host]

This message is brought to you by Apple Card. Apple Card lets you earn daily cash back on every purchase every day. Apply in the Wallet app on iPhone today subject to credit approval. Apple Card is issued by Goldman Sachs Bank USA Salt Lake City Branch terms and more at applecard.com here's something good on women's health and longevity is brought to you by Seneca and our partner LifeMD. LifeMD believes every woman should have access to affordable prescription medication and personalized care that understands the whole woman. Through virtual care and insurance supported options, LifeMD is making expert women's healthcare more accessible and affordable.