From advertising and luxury goods to cars and heavy engineering, European industry is retrenching and abandoning its already modest growth targets, a worrying sign for investors who bought into the summer stock market rally.
The signals from third-quarter results so far are that Asian, emerging market and resources sector demand is no longer making up for weakness at home.
The car industry has turned in a story of tumbling profits, plant closures and the first industry bailout since the 2008 crisis for PSA Peugeot Citroën. Advertisers are seeing budgets cut, machine tools makers ABB and Sandvik AB have lost much of the previously buoyant demand for mining equipment and oil rigs.
Top German grocer Metro turned in a 35-per-cent plunge in profits and warned of worse to come, and even luxury clothing group Guccio Gucci SpA's previously insatiable Chinese customers are curbing their appetites.
"We're seeing evidence of a weak economy all around us," Royal Dutch Shell PLC's chief financial officer Simon Henry told reporters on Thursday.
As well as being Europe's largest company selling fuel to millions of drivers and manufacturers, Shell also provides the chemicals that go into making everything from detergents to refrigerators via waterproof clothing and computer parts.
"European consumer and commercial/industrial demand is pretty weak across the board, including chemicals, and (there are) very few signs of recovery," Mr. Henry said.
Thomson Reuters Starmine data shows that out of the 53 per cent of leading European companies outside the energy sector that have reported earnings so far, 44 per cent undershot forecast profits. More worryingly, as an indicator of future earnings growth and the robustness of demand, 53 per cent missed expectations for revenue.
Reuters asset allocation polls out this week showed that a shift into keenly priced European equities continued into October. Global fund holdings troughed in May.
But portfolio managers are hedging their bets.
"We will see a worsening of the situation that we have had for the past two years. You have to see where additional returns can be achieved with acceptable risks," said Hans-Jorg Frantzmann, head of institutional sales and relationship at Fidelity in Germany.
"We recommend fishing in a pond that is as big as possible. For investors in Germany that means not just focusing on Germany or the euro zone, but looking worldwide."
Data from funds industry trackers Lipper shows that in both absolute and relative terms, European investors have been reducing their holdings of shares in developed markets like Europe and the United States since 2006.
Developed market equity has been squeezed in the risk spectrum by emerging market equity and alternatives like derivatives, commodities and property at the higher end, and by emerging market and global high-yield bonds at the lower end.
By June of this year, the total pot invested by European cross-border mutual funds in national and regional developed markets equity had fallen to €303-billion ($386-billion) and 15 per cent of the total. That was down from €464-billion and 29 per cent of the total invested in 2006.
"I would expect the 'squeeze' of developed market equity funds to continue, certainly in the near term," said Ed Moisson, head of Lipper's U.K. and cross-border research.
"Even if emerging market debt and high yield bonds, which have enjoyed the biggest inflows over the past twelve months, lose their appeal, it seems more likely that it will be global and emerging market equities that will be the main beneficiaries."
Analysts at Morgan Stanley spotted the early signs of an unjustified rally this summer in both European and U.S. shares.
"We think it's now time to turn defensive on what is likely to be a tradeable setback for risk assets, particularly developed world equities," the bank's cross asset strategy team said in a research note last week.
The signals are not all one way. Norway's $660-billion (U.S.) sovereign wealth fund said on Friday it was optimistic on European stocks for the long term, even though it bought less of them in the third quarter compared to earlier this year.
But even those European stocks that might have worn a defensive tag in Europe look less of a safe haven in this cycle. Food groups Groupe Danone SA and Nestlé SA have reported disappointing sales as consumers switch to cheaper alternatives, and health-care giant GlaxoSmithKline PLC has been hit by continued pressure on drug prices in austerity-hit Europe.
Slipping business sentiment in core European countries such as Germany as well as slowing Asian demand for European cars and machines seem to indicate the coming months could remain tough.
"Europe is not going to be a growth engine for the world for the next year," Willem Verhagen, senior economist at ING Investment Management, said.