If you think the US economy and its benchmark companies are going straight to hell, well then Europe’s top dogs are not doing so much better. Despite the fact that US subprime debacle has had less impact on the Eurozone and have strong underlying economies, the weak dollar has boosted the US while felling its counterpart across the pond.

European companies suffered a bigger fall in first-quarter profits than their US counterparts in a striking contrast to the underlying performance of their home economies.

Net earnings have fallen 23.4 per cent among 2,138 companies in Europe in the first quarter, while 5,494 US companies saw a drop of only 13.4 per cent, according to Bloomberg data last week after nearly all groups on both continents had reported.

This is in spite of the fact that the financial crisis has had less of an impact so far on the eurozone economy, which, led by Germany, performed far more robustly in the first quarter than the US or UK.

A higher percentage of companies in the eurozone also produced negative surprises in their earnings than those in the US, ING analysts said, although one bright spot was the UK – one of the European countries with the worst economic prospects.

“We have got a disconnection between what domestic economies are doing and how companies are performing,” said Gareth Williams of ING.

Philip Isherwood, head of European equity strategy at Dresdner Kleinwort, said: “This reversal makes sense – we joke here that the best model for European profits is the US lagged by one year. They are a bit before us in working through the effects of this crisis.”

Nick Nelson, head of European equity strategy at UBS, said the biggest factor in the differing earnings performance was currency movements.

“US companies have gained from the dollar’s weakness and European ones have suffered,” he said.

Mr Williams added: “There is evidence that the US manufacturing sector is getting quite a big boost from the currency.”

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