Jan. 3 (Bloomberg) -- European stocks dropped for a second day after U.K. retailer DSG International Plc forecast that profit will miss analysts' estimates and record oil prices dimmed earnings prospects for consumer-goods and travel companies.

DSG International, Europe's second-biggest consumer electronics vendor, tumbled 27 percent. Clothing-store company Next Plc retreated after predicting sales won't grow this year. Discount airline Ryanair Holdings Plc slid the most in six weeks.

``It's a difficult start to 2008,'' said Cesar Martinez, who helps manage $13 billion at Gesmadrid SA in Madrid. ``It seems we are headed for a big slowdown. We are seeing profit warnings and oil is not helping either.''

The Dow Jones Stoxx 600 Index lost 0.3 percent to 358.95. The index fell 1.3 percent on the first trading day of the year after a report showed U.S. manufacturing dropped the most in five years last month, providing more evidence that growth in the world's largest economy is slowing.

Stocks pared declines today after ADP Employer Services said U.S. companies added 40,000 jobs in December. The increase was more than forecast and followed a revised 173,000 gain for the prior month that was less than previously estimated, according to the private survey based on payroll data. The Labor Department releases its monthly employment figures tomorrow.

In a separate report, the Commerce Department said today that factory orders rose more than forecast in November.

National benchmarks decreased in 13 of the 18 western European markets. Germany's DAX lost 0.5 percent, and France's CAC 40 slid 0.1 percent. The U.K.'s FTSE 100 gained 1 percent, led higher by energy companies.

The Stoxx 50 added 0.2 percent, and the Euro Stoxx 50, a measure for the euro region, retreated 0.1 percent.

DSG, Kesa

DSG International plunged 29.25 pence to 78. The owner of PC World and the Currys chain said annual pretax profit will be as much as 50 million pounds ($99.2 million) less than analysts' estimates because of a drop in same-store sales.

Moody's Investors Service cut its credit rating on DSG by one step to Baa3, the lowest of its 10 investment grade levels, citing ``a weak interim trading performance.'' The ratings provider changed its outlook to ``stable'' from ``negative.''

Kesa Electricals Plc, the owner of Darty electronics stores in France and Comet in the U.K., fell 8.3 percent to 215.5 pence.

``The profit warning from DSG International shows that the Christmas season in the U.K. wasn't nearly as good as any retailer needed it to be,'' said Espen Furnes, who helps oversee the equivalent of $7.1 billion at Storebrand Asset Management in Oslo. ``We're going to see more warnings in the weeks to come.''

TomTom, Next

TomTom NV, the world's largest maker of car-navigation equipment, fell 7.2 percent to 47.96 euros, the biggest drop in three weeks, after DSG said it sold fewer navigation devices.

Unit sales of navigation devices ``are down slightly year on year,'' DSG Chief Financial Officer Kevin O'Byrne said on a conference call today. He didn't specify the time period he was referring to.

The DSG comment is ``not supported by market data we have,'' TomTom spokesman Richard Piekaar said in a phone interview today. ``Based on the data we receive, there's a considerable growth in volumes year on year.''

Next fell 6.8 percent to 1,552 pence. The U.K.'s third- largest clothing retailer said U.K. same-store sales won't grow for a fourth year as higher borrowing costs curb consumer spending.

The Leicester, England-based company is ``extremely cautious'' about the outlook for 2008 because of the increased demands being placed on shoppers' incomes, Next said.

Ryanair, BP

Ryanair, Europe's largest low-fare carrier, dropped 5.8 percent to 4.325 euros. Deutsche Lufthansa AG, Europe's second- largest airline, lost 2.5 percent to 17.75 euros.

Oil traded near $100 a barrel most of the day, touching a record of $100.05 near the close of most European markets after an Energy Department report showed inventories dropped more than expected last week.

BP Plc, Europe's second-biggest oil company, gained 3.1 percent to 635.5 pence. Royal Dutch Shell Plc, the largest, added 2.6 percent to 2,152 pence.

Inmarsat

Inmarsat Plc fell 6.6 percent to 498 pence. The U.K. satellite company that provides communications services had its biggest drop in London trading since its June 2005 initial public offering after Merrill Lynch & Co. analysts downgraded the stock.

The company faces ``near-term risks'' associated with the March or April launch of a satellite as about one in 10 satellites fail at that stage, analysts Wilton Fry and Graham Ruck wrote in a research note today.

The analysts lowered their recommendation on the stock to ``neutral'' from ``buy.''

E.ON AG, Germany's largest utility, rose 2 percent to 146.18 euros after Lehman Brothers Holdings Inc. said the company may boost earnings targets and as power prices reached records.

RWE AG, Germany's second-biggest power producer, jumped 3 percent to 98.17 euros. Fortum Oyj, Finland's biggest utility, climbed 4 percent to 32.65 euros.

To contact the reporter for this story: Sarah Thompson in London at sthompson17@bloomberg.net

Last Updated: January 3, 2008 12:21 EST