May 11 (Bloomberg) -- European stocks dropped, heading for the biggest weekly decline in two months, on speculation a slowing U.S. economy will hurt companies' earnings.

ABB Ltd., the world's largest builder of power networks, chemical maker BASF AG and financial-services company ING Groep NV paced declines by companies dependent on revenue in the U.S. KarstadtQuelle AG slid as the German retailer's loss widened, and Fortis retreated after earnings fell more than analysts estimated.

Stocks in the region have retreated from a 6 1/2-year high set earlier this week on concern higher U.S. import prices and rising interest rates in Europe will cool economic growth further. The Dow Jones Stoxx 600 Index has dropped 1.8 percent this week.

``The very, very good times are certainly over,'' said Ulrike Pfuhl, Frankfurt-based portfolio manager at JPMorgan Asset Management, which oversees $847 billion. ``Fear of slowing growth in the U.S. is weighing on the markets.''

The Stoxx 600 lost 0.5 percent to 385.69 as of 12:54 p.m. in London. The Stoxx 50 slid 0.4 percent, and the Euro Stoxx 50, a measure for the 13 nations sharing the euro, decreased 0.7 percent.

RWE AG rallied on a report that Electricite de France SA, Europe's biggest power producer, plans to buy Germany's second- largest utility. Rio Tinto Group led mining stocks higher on renewed takeover speculation.

National Markets

National benchmarks decreased in all 18 western European markets. France's CAC 40 dropped 0.9 percent. U.K.'s FTSE-100 slid 0.1 percent, and Germany's DAX fell 0.8 percent.

A report today will probably show U.S. retail sales slowed in April in the world's largest economy. Sales rose 0.4 percent after a 0.7 percent gain the prior month, economists said before the Commerce Department report due at 8:30 a.m. in Washington.

ABB fell for the first time in three days, dropping 1.7 percent to 23.75 Swiss francs. The Americas accounts for about a quarter of ABB's revenue.

Shares of BASF slipped 1.3 percent to 86.35 euros. North America is the second-biggest market for BASF. ING dropped 1.4 percent to 32.75 euros. The largest Dutch financial-services firm generated more revenue in the Americas than in any other market last year.

Former Federal Reserve chairman Alan Greenspan said he still sees a one-third chance of a recession in the U.S. this year, according to Avi Dwipayana, president director of PT Trimegah Securities, who attended a presentation hosted by Merrill Lynch & Co. in Singapore today.

KarstadtQuelle, Fortis

KarstadtQuelle declined 3.8 percent to 26.65 euros. The owner of Thomas Cook AG, Europe's second-largest travel company, said yesterday its first-quarter loss widened to 140.9 million euros ($190.4 million) as sales dropped 4.5 percent and kerosene prices climbed.

Fortis fell 2.7 percent to 32.45 euros after saying first- quarter net income fell 12 percent to 1.17 billion euros. The median estimate of 10 analysts surveyed by Bloomberg was 1.26 billion euros.

Shares of RWE gained 5.3 percent to 82.10 euros after SWR Radio reported Electricite de France plans to buy the utility. EDF representatives have already met with the German government to discuss the proposed deal, the station SWR said.

RWE has seen ``no signs'' of a bid from the French company, spokeswoman Julia Scharlemann said. A German government spokesman denied any contact with EDF.

Takeovers

Takeovers in the region have totaled $1.07 trillion in 2007, according to data compiled by Bloomberg. They reached a record $1.6 trillion last year.

``We believe that 2007 will topple the amount of deals we saw come through last year,'' said Franz Wenzel, deputy director of investment strategy in Paris for Axa Investment Managers, which oversees $647 billion worldwide. ``We are far from a bubble. The premiums being paid are justifiable and in most cases still moderate.''

Rio Tinto, the world's third-largest mining company, gained 4.4 percent to 3,695 pence. Xstrata Plc, the world's fourth- biggest copper producer, gained 1.6 percent to 2749 pence.

``The shares are boosted by persistent takeover talk,'' said Thomas Nagel, a trader at Equinet Securities AG in Frankfurt.

The shares fell yesterday after Rio Tinto said it hasn't received an approach from BHP Billiton Ltd. or other parties. The stock is 11 percent this week, heading for the biggest gain in seven months.

Volvo AB rose 7 percent to 130.25 kronor, the steepest gain in the Stoxx 600 today. The world's second-largest truckmaker said first-quarter net income dropped 6 percent to 3.75 billion kronor ($550 million). That exceeded the 3.37 billion-kronor median estimate of seven analysts surveyed by Bloomberg News. Revenue dropped 3 percent to 61 billion kronor.

Of the 33 Stoxx 50 companies that reported first-quarter earnings so far, 23 have surpassed analysts' estimates, according to data compiled by Bloomberg.

ThyssenKrupp

ThyssenKrupp AG fell 2.3 percent to 40.41 euros. Germany's largest steelmaker said fiscal second-quarter profit fell 46 percent after European antitrust authorities fined the company for fixing prices for elevators and escalators.

Alcatel-Lucent rose 1.7 percent to 9.88 euros after the world's largest supplier of telecommunications equipment forecast higher sales and stuck to a target for cost savings in 2007. Credit Suisse Group raised its recommendation on the stock to ``outperform'' from ``neutral.''

To contact the reporter on this story: Andreas Hippin in Frankfurt at ahippin@bloomberg.net.

Last Updated: May 11, 2007 07:57 EDT