Feb. 24 (Bloomberg) -- European stocks retreated, extending the Dow Jones Stoxx 600 Index’s 2009 decline, as the deepening recession eroded earnings and pushed German business confidence to a 26-year low.

Basilea Pharmaceutica AG tumbled 37 percent after the Swiss developer of anti-infection drugs reported a full-year loss and said a regulatory review of its Ceftobiprole treatment was delayed. Novartis AG, Switzerland’s second-biggest drugmaker, dropped 1.9 percent as Chief Executive Officer Daniel Vasella said pressure on drug prices and patents will grow this year.

The Stoxx 600 slid 1.4 percent to 172.86, the lowest since March 2003. The gauge retreated 13 percent in 2009 as companies from Anglo American Plc to Cie. de Saint-Gobain SA indicated the recession is worsening.

“This is turning out to be one of the worst bear markets in the past 100 years,” Bob Parker, who helps oversee $600 billion as vice chairman of Credit Suisse Asset Management, said in a Bloomberg Television interview in London. “The question we have to ask is: what are the catalysts for creating a base and what are the catalysts for an eventual rally.”

National benchmark indexes retreated in 16 of 18 western European markets. The U.K.’s FTSE 100 fell 0.9 percent. France’s CAC 40 dropped 0.7 percent. Germany’s DAX slid 1 percent as Bayerische Motoren Werke AG tumbled.

Cheapest Since 1985

The Standard & Poor’s 500 Index advanced 1.8 percent after Home Depot Inc. reported profit that beat analysts’ estimates. The S&P 500 yesterday sank 3.5 percent, leaving the index valued at its cheapest relative to earnings since 1985.

The Stoxx 600 has retreated 53 percent since the start of last year as credit-related losses at financial firms worldwide climbed to $1.1 trillion and Europe, the U.S. and Japan fell into the first simultaneous recessions since World War II.

German business confidence declined to a 26-year low in February as the worst recession since World War II prompted companies to curb production and lay off workers. The Ifo institute in Munich said its business climate index, based on a survey of 7,000 executives, fell to 82.6 from 83 in January.

A separate report showed confidence among U.S. consumers plunged to a record low in February, signaling spending will slump as unemployment soars.

Basilea Retreats

Basilea Pharmaceutica fell 37 percent to 70 Swiss francs, the biggest drop in the Stoxx 600. The Swiss developer of anti- infection drugs reported a full-year loss and said its Ceftobiprole drug used to treat skin infections is being delayed in Europe.

Novartis slipped 1.9 percent to 47 francs. Budget restrictions because of the global financial crisis and an aging population will lead governments and payers to put strains on drug prices and patents, CEO Vasella said today at the company’s annual shareholder meeting in Basel, Switzerland.

Georg Fischer AG sank 7.5 percent to 149 francs. Europe’s largest maker of iron castings for cars said full-year profit fell 72 percent to 69 million francs ($59 million) as demand from the automotive industry collapsed.

Profits have declined 83 percent for 179 companies in the Stoxx 600 that released results since Jan. 12, data compiled by Bloomberg show.

“There’s discouragement about the market,” Chicuong Dang, an analyst at KBL Richelieu Gestion in Paris, which oversees $5.1 billion in assets, said in a Bloomberg Television interview. “Bad earnings results are weighing on sentiment, which is clearly low.”

BMW, Norsk Hydro

BMW retreated 4.6 percent to 19.23 euros. The world’s largest maker of luxury cars was cut to “underweight” from “overweight” at Morgan Stanley, which said sales may fall by one-third by 2010.

Norsk Hydro ASA dropped 2 percent to 22.4 kroner. The world’s fifth-largest aluminum producer was cut to “underweight” from “overweight” at JPMorgan, which said demand for the metal “remains weak and prices are under pressure.”

KBC Group NV slid 3.4 percent to 8.50 euros. Belgium’s biggest bank and insurer by market value was cut by Deutsche Bank AG to “sell” from “hold.”

Vestas Wind Systems A/S slipped 4.1 percent to 269.50 kroner. Shares of the largest wind-turbine maker were cut to “underweight” from “neutral” at JPMorgan, which cited “risks to near-term and long-term industry profitability.”

Intesa Sanpaolo SpA, Italy’s second-biggest bank, climbed 6.4 percent to 1.87 euros. Prime Minister Silvio Berlusconi said that there is no chance that an Italian bank will need to be nationalized.

UniCredit SpA, Italy’s largest bank, increased 3.5 percent to 96.2 cents.

To contact the reporter on this story: Adria Cimino in Paris at acimino1@bloomberg.net.

Last Updated: February 24, 2009 13:15 EST