Economic uncertainty abounds. The sovereign debt crisis could spiral out of control and drive Europe into deep recession, or it could be solved relatively quickly. The markets appear to be pricing in more of the former. But there is a disconnect between stock prices and actual business fundamentals—a trend also occurring in the U.S.. That trend: businesses continue to grow and report profits. So despite all the doom and gloom, there is a positive side.
As Europe’s debt crisis raises the risk of a recession, companies in the region show no signs of slowing with earnings growth poised to top their U.S. rivals. Net income for companies in the Stoxx Europe 600 Index will rise by 10.5 percent in 2012 after increasing 11 percent this year, led by carmakers such as Porsche SE and retailers including Burberry Group Plc (BRBY), according to more than 12,000 analyst estimates compiled by Bloomberg through last week. The gauge is headed for four straight years of income growth exceeding 10 percent, the longest streak since 1998, data show.
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