Last checked at 
* Q2 earnings in Europe expected to fall 8.5 pct: TR data
* Investors pull record amounts from European equity funds
* Europe EPS forecasts: http://reut.rs/2553txN
By Atul Prakash and Vikram Subhedar
LONDON, July 22 (Reuters) - EasyJet's admission this weekthat it was unable to give an earnings forecast in the near-termunderscores the predicament investors face as corporate resultsseason gets underway next week in Europe.
Earnings at Europe's largest companies are expected to fallnearly 9 percent overall, according to Thomson Reuters data,although investors are focusing more on what corporates aresignaling for the next few quarters and on any potential impactfrom Brexit.
If companies are unable to predict their performance,however, the task for stock pickers and analysts trying tofactor in a slew of risk factors becomes much tougher.
A sluggish economy, worries over the health of the bankingsystem and a lack of earnings growth all exacerbated by doubtsover the impact of Brexit has dimmed the appeal of Europeanshares, which are underperforming peers on Wall Street. The S&P500, for example, hit a record high this week.
Europe's STOXX 600 is down more than 7 percent thisyear.
Investors pulled a record $6.2 billion from European equityfunds last week in the 24th successive week of outflows, datafrom EPFR and Bank of America Merrill Lynch showed.
Earnings season presents another test for already weakinvestor confidence.
"Valuations are becoming even more stretched relative tofundamentals than they were, and that's not a particularlyhealthy place to be," said Peter Dixon, an economist atCommerzbank.
European earnings are expected to contract for the fourthyear in the past five in 2016. Yet valuations, at 14.8 timesforward earnings, are more than 23 percent above their averageover the past decade.
"When investors realize just how far they are pushingthings, they might want to rethink things," Dixon added.
The energy sector, hobbled by weaker crude prices a yearago, are expected to show the sharpest declines in earnings andrevenue for the second quarter, Thomson Reuters data shows,followed by telecoms, technology firms and industrials.
Revenue is expected to decline by 6 percent in the secondquarter for the Stoxx 600 companies.
A preliminary survey of purchasing managers in UK conductedby Markit fell by the most in its 20-year history and is alreadyindicating the threat of a recession, suggesting companies willfind it harder to grow.
Robert Parkes, an equity strategist at HSBC, says earningsdowngrades are likely to spill over into next year too.
"Companies are not giving any guidance, so it's difficultfor analysts to change their numbers. Some analysts could waituntil Q3 results when companies might give more guidance interms of how much Brexit has affected their businesses," Parkessaid.
(Editing by Vikram Subhedar)
