A number of Europe’s leading companies yesterday reported stronger-than-expected earnings, underlining the strength of the corporate recovery across the continent.

Heavyweight names such as Siemens, Royal Dutch Shell, Volkswagen and BASF all saw their second-quarter profits beat analysts’ forecasts considerably.

“It’s another good set of results,” said Adrian Cattley, equity strategist at Citigroup. “It is important not to confuse [gross domestic product] with stock markets. Just because European GDP is poor doesn’t mean that European corporate profitability should be poor.”

Analysts are expecting European earnings to rise about 25-35 per cent this year before tapering to 10-15 per cent next year.

Industrial companies have led the recovery after a crushing fall in earnings last year. VW and BASF, Europe’s largest carmaker and the world’s biggest chemicals group respectively, both saw their operating profits double as they benefited from strong growth in emerging markets and a weaker euro.

The solid results and good news last week in the banking sector is causing investors who shunned Europe for most of the year to think again. “Until last week, it was hard to find a US investor interested in Europe. But the clarity gained via Basel III [reforms on bank capital] and information gleaned from the bank stress tests means further allocations to Europe are being considered,” said Karen Olney, strategist at UBS.

Some executives and analysts are starting to express concern that the growth in profitability could slow in the second half of this year and in 2011.

Jürgen Hambrecht, BASF’s chief executive, warned that austerity measures would damp growth in the second half, although he expected it still to continue at a moderate pace. Mr Cattley said: “The second quarter is probably the fastest pace of acceleration we will see.”

Other groups reporting strong earnings yesterday included oil companies Shell and Repsol as well as Telefónica, the Spanish telecommunications group, and UK engineer Rolls-Royce.

“The recovery is starting to feed through into domestic markets. Everyone wrote the euro area off but people are realising that core Europe isn’t broken: Germany is bigger than the periphery,” said Ms Olney.