International demand will help push net income up more than 10 percent next year at mining companies, retailers and builders, analysts say. As much as 54 percent of sales in the Stoxx 600 comes from outside Europe, according to data compiled by Royal Bank of Scotland Group Plc. Earnings in the Stoxx Banks Index may gain 23 percent in 2012, the data show.

Analysts' predictions for 2012 imply a fourth year of growth topping the 8 percent average since 1981, data from Bank of America Corp.'s Merrill Lynch division show. The forecast for this year's expansion in Stoxx 600 earnings has dropped to 11 percent from 21 percent in January. Projections for 2012 fell 3.5 percent in October, the most since March 2009.

The Stoxx 600 lost 2.3 percent to 226.74 at 8:50 a.m. in London. The European gauge slid 3.7 percent to 232.17 last week as government bond yields rose. The index ended last week at 9.2 times 2012 profit forecasts, compared with a median of 10.3 times over the past five years, data compiled by Bloomberg show. The Standard & Poor's 500 Index in the U.S. slipped 3.8 percent to 1,215.65, bringing its ratio to 11.1 times 2012 estimates.

“European markets are a mess and there is a debt crisis, but if you look at specific companies, they are doing fine,” Herbert Perus, who helps oversee about $36 billion as head of global equities at Raiffeisen Capital Management in Vienna, said in a phone interview. “No one believes in it at the moment, but I don't think it is unrealistic that earnings will grow again.”

Yields on Greek two-year notes climbed to a record 115.49 percent last week while borrowing costs in Spain and Italy rose to euro-area records this month as the debt crisis spread. Economists have lowered projections for the euro zone's 2012 GDP growth to 0.7 percent from 1.8 percent in January, according to the median estimate of 21 respondents in a Bloomberg survey. U.S. GDP is poised to expand 2.2 percent.

Greece and Portugal will contract this year, according to European Commission forecasts. A report on services and manufacturing in the region on Nov. 4 showed output decreased more than initially estimated in October.

GDP in the euro zone declined from the third quarter of 2008 through the second quarter of 2009, the only recession since European Union data began in 1995. Earnings tumbled 57 percent in 2008 amid the financial crisis that peaked with the collapse of Lehman Brothers Holdings Inc. in September of that year, according to data compiled by Bloomberg.

Profits retreated an average 31 percent in four contractions since 1980, data from Bloomberg and Charlotte, North Carolina-based Bank of America show.

“Politicians have missed their opportunity to prevent a European credit crunch,” said Azad Zangana, a London-based economist at Schroders Plc, which oversees $345 billion. “Many euro-zone banks are already on life support. We are now forecasting a serious recession in the euro-zone in 2012, which is also likely to result in recessions in the wider European region.”

German investor confidence fell to a three-year low, a report on Nov. 15 showed. Retail sales in the region decreased 0.7 percent in September, more than economists predicted, data released Nov. 7 show. The European Union's statistics office said Nov. 14 industrial production slipped the most in 2 1/2 years in September.

“This highlights how much of an effect the sovereign debt crisis has had on corporate confidence and capital expenditures,” said James Butterfill, who helps oversee $63 billion as global equity strategist at Coutts & Co. in London. “It is difficult to see where earnings growth will come from.”

Profit fell 11 percent on average between 1991 and 1993, Merrill Lynch data show, after the U.S. savings-and-loan crisis curbed global growth. Profits declined 27 percent in 1981 as rising interest rates shrunk the U.S. economy.

Companies see no such reversal in 2012. Anglo American Plc, the London-based mining company that analysts expect will boost earnings by 15 percent next year, has dropped 29 percent in 2011. Chief Executive Officer Cynthia Carroll said Sept. 29 her industry has a “very, very solid” outlook as China expands.

Carroll spent $5.1 billion in cash on Nov. 4 to buy the Oppenheimer family's 40 percent stake in De Beers, the world's largest diamond miner. Anglo American trades at 6.13 times next year's estimated earnings, near the lowest since the bull market started in March 2009.

Porsche is the fourth-cheapest stock among 49 car and auto parts companies in the MSCI World Index after falling to 4.9 times 2012 estimates, about half its valuation at the start of the year. The company said Oct. 28 nine-month profit at its carmaking unit rose 25 percent on demand for the Cayenne sport- utility vehicle.

Porsche expects sales to reach a record in 2012, a person with knowledge of the matter said Oct. 13. Porsche in Stuttgart, Germany may boost profit by 46 percent next year, according to analysts surveyed by Bloomberg.

Burberry, the U.K.'s largest luxury-goods maker, said Nov. 15 it can weather Europe's sovereign-debt crisis by focusing on wealthy clients in cities such as New York and Hong Kong. The 155-year-old maker of leather bags and trench coats gets more than half of sales in 25 “very strong” city markets with high net-worth individuals and tourists, Chief Executive Officer Angela Ahrendts said on a conference call that day.

Edmund Shing, a strategist at Barclays Plc in London, says stocks have fallen too far. Profits growth may be in “the mid- single digits” next year, he said.

“We don't believe it is time to throw in the towel and abandon the European equities ship,” said Shing. “Weather-worn and creaking though it may be.”

Bloomberg