Much of the global corporate earnings rebound – the rebound expected in Q1 2021 – could be further pushed back as coronavirus lockdowns and mobility restrictions in several countries tarnish hopes for a faster economic recovery, investment banks said.

China announced lockdowns in four cities and European countries revealed stricter and longer coronavirus restrictions on Wednesday, shattering normal hopes and sparking concerns about further economic damage in 2021.

Germany, the UK and the Netherlands said strict COVID-19 restrictions would apply until early February, and Italy said it would extend its state of emergency until the end of April. Japan has also extended the state of emergency in Tokyo, hurting prospects for an already belated Summer Olympics.

In the United States, California, the most populous state, resumed massive home stay orders last month as infections increased.

These measures worldwide drew caution from major investment banks and other market watchers.

“An additional wave of COVID is among the top risks to be monitored this year,” said Vincent Manuel, global CIO at Indosuez Wealth Management.

“In the past two quarters, we have been on the trend of positive earnings momentum in both Europe and the US, which came from the value segments of the market. Now it is true that any disruption from COVID would trigger negative reviews for the first quarter. But what is more important is the recovery capacity of profits in the following quarters. “

Analysts’ earnings estimates for the first quarter did not reflect the concern either. Europe is seeing profits jump a whopping 40 percent, according to IBES data from Refinitiv, while profits of the US S&P 500 companies are expected to rise 16 percent. Estimated first-quarter earnings growth for the S&P 500 has increased slightly since Jan. 1.

Business advice for the first quarter and 2021 will be central to investors in the coming weeks. This week marks the start of earnings for the fourth quarter of 2020 for US companies. Results from JPMorgan Chase and other major banks are expected on Friday.

“We see the risk of a downward forecast this earnings season,” Bank of America equity strategist Savita Subramanian said in a statement Wednesday, highlighting a consensus on US earnings that is only three percent lower than before COVID-19 in 2019.

“While additional impulses could harbor upside risks, rising COVID cases point to a lukewarm recovery from here.”

People wearing protective face masks sit near the Colosseum in Rome, Italy [File: Guglielmo Mangiapane/Reuters]There have been some cracks in expectations of a V-shaped earnings rebound, with the pace of upward revisions in global earnings estimates slowing in recent weeks.

Many companies are still affected by the pandemic. Coca-Cola Co announced last month it would cut 2,200 jobs worldwide, including 1,200 in the US, as the virus affects the economy.

According to a refinitive analysis based on MSCI indices, US and European companies posted earnings growth of 20.8 percent and 38 percent, respectively, in 2021.

Some US strategists believe that consensus forecasts may underestimate the expected recovery in the economy.

Jonathan Golub, chief strategist for US equities and head of quantitative research at Credit Suisse Securities, last week raised his targets for the S&P 500 for 2021, saying in a report that “the likely avalanche of pent-up consumer demand cannot be ignored “.

The introduction of vaccines was a major reason for the bright outlook.

“There is widespread hope that the introduction of COVID-19 vaccines in 2021 can normalize the underlying real economy and increase income, employment and margins,” said Steen Jakobsen, chief investment officer at investment bank Saxo.

“The risk is that new mutations in the virus will water down our attempt to normalize our society with the first-generation vaccine.”