Famings - a return to positive EPS growth in 201 7% EPS growth in 2017 as global growth improves and Resources EPS recovers We think the earnings backdrop will be supportive in 2017 with a return to positive EPS growth in Europe for the first time since 2014 and with downside to consensus forecasts for the year ahead that are well below average. Our base case assumes +7% EPS growth in 2017 and 2018. With EPS broadly stagnant over the last 6 years, investors might justifiably ask what is different this time. We see several reasons to think mid to high single digit EPS growth is achievable next year. Chart 25: Earnings revisions are currently modestly positive Chart 26: Broad based recovery in global growth (based on 29 PMIs) ams 100% 10% 90% 0% 80% 70% -10% 60% -20% 50% -30% 40% 40% Bt 12100 © 1203«=— «12/06 «= 1209S 12121218 soy, | _—__—2 PMIs 50 een’ OF PMIG increasing (last Sin) Stoxx 600 EPS revisions ratio (4 wk avg) —-—=13-week average 11113 03/14 O74 1144 03/15 07/15 11/5 03/46 07/16 Source: BofA Merrill Lynch Global Research, Datastream, IBES Source: BofA Merrill Lynch Global Research, Markit, Bloomberg Return to positive EPS growth feasible with global GDP at 3.5%... First, global growth is accelerating and on our economists’ base case forecasts global GDP growth will be 3.5%, the first materially above trend growth year since 2010. That is significant for European earnings given a reasonably tight relationship to global GDP growth. 3% represents the tipping point around which earnings growth tends to turn positive according to our regression model. At the BofAML forecast of 3.5% global GDP growth, 7% EPS growth is implied as likely by the same model. ..as leading Indicators point to a synchronized global recovery. What gives us confidence in this putative earnings recovery is the more synchronized nature of the current recovery. All major regions of the world are showing momentum in growth indicators for the first time in several years. One measure of the b