June 30 (Bloomberg) -- European industrial-goods stocks fell after ABB Ltd., the world's biggest maker of power transformers, said earnings this quarter will be ``significantly lower'' and cut a full-year profit forecast.

BHP Billiton and Rio Tinto Group led gains among mining shares after Merrill Lynch & Co. raised the companies' profit estimates. France Telecom SA advanced as Smith Barney advised investors to buy the phone company's stock.

Benchmark indexes were little changed. The Dow Jones Stoxx 600 Index lost less than 0.1 percent to 276.55 as of 9:10 a.m. in London. The Stoxx 50 also fell less than 0.1 percent, as did the Euro Stoxx 50, a gauge for the 12 countries using the euro.

U.S. stocks retreated yesterday amid expectation that the Federal Reserve will raise interest rates in the world's biggest economy for the ninth time in a year and signal more increases. The decision is due after European markets close today.

``Investors were generally cautious ahead of the Federal Reserve interest-rate decision,'' said Ian Murrell, a trader at Wills & Co. Stockbrokers in London. ``Anything other than a quarter-point hike will be a shocker. But the accompanying statement will be closely scrutinized.''

National benchmarks fell in 10 of the 17 biggest Western European markets. Germany's DAX Index and the U.K.'s FTSE 100 Index both lost less than 0.1 percent. France's CAC 40 Index lost less than 0.1 percent. The Swiss Market Index slid 0.3 percent.

ABB tumbled 8.6 percent to 8.18 Swiss francs, the sharpest fall in the Stoxx 600. The Zurich-based company said second- quarter net income will drop from the previous period.

BHP, Rio Tinto

Profit before interest and tax expressed as percentage of sales in 2005 will be between 6.6 percent to 7.1 percent because of additional charges and higher raw material costs, the company said. ABB earlier forecast a margin of 7.7 percent.

Sandvik AB, the world's biggest maker of metal-cutting tools, lost 1 percent to 282.5 Swedish kronor. Siemens AG, Germany's largest engineer, lost 0.2 percent to 60.82 euros.

BHP and Rio Tinto, the world's No. 1 and No. 3 mining companies, climbed 0.9 percent and 1 percent respectively. Merrill analysts raised earnings estimates on speculation iron ore prices may reach another record next year, reversing earlier predictions of a decline.

France Telecom, Europe's second-largest phone company, added 1.6 percent to 24.18 euros. Smith Barney, a unit of Citigroup Inc., upgraded the stock to ``buy'' from ``hold,'' citing reduced concern about revenue declines. The shares should be trading at 26.5 euros today, analysts including Terence Sinclair wrote in a report.

Dresdner Downgrade

HSBC Holdings Plc, Europe's biggest bank by market value, dropped 0.8 percent to 888 pence after Morgan Stanley downgraded the shares to ``underweight'' from ``equal-weight'' because rising interest rates will hurt earnings.

Nokia Oyj, the world's biggest mobile-phone maker, slid 0.7 percent to 14.01 euros. Dresdner Kleinwort Wasserstein cut its recommendation to ``sell'' from ``hold,'' citing increasing competition from companies such as Motorola Inc.

Alpha Bank SA, Greece's second-largest lender, dropped 6.5 percent to 22.34 euros after the shares were cut to ``neutral'' from ``outperform'' by analysts at JPMorgan Chase & Co. Alpha Bank yesterday reported first-quarter earnings that fell short of analyst estimates.

Aviva Plc, the U.K.'s biggest insurer, added 1.3 percent to 620 pence after JPMorgan raised the shares to ``overweight'' from ``neutral.''

Fed Decision

The Standard & Poor's 500 Index yesterday slipped 0.1 percent to 1199.85, with all the decline coming after trading in Europe ended.

The U.S. benchmark has a 0.9 correlation with Europe's Dow Jones Stoxx 600 Index in the past year, according to data compiled by Bloomberg. The number can range between -1 and 1, and the nearer the figure is to 1, the closer the relationship between the indexes.

All but one of 93 economists in a Bloomberg News survey expect the Fed to lift its target rate by a quarter-point to 3.25 percent. The central bank, which raised its benchmark by quarter- point increments at every one of its policy meetings since last June, reiterated in May its plan to make future increases at a ``measured'' pace.

``We don't expect many surprises because the Fed is pretty clear before the decision,'' said Valerie Plagnol, head of strategy at CM-CIC Marches in Paris. ``We'll be looking closely at the discourse that follows.''

European benchmarks are headed for their third consecutive quarterly gain and the best first half since 1999. The Stoxx 600 has advanced 5.5 percent since the end of March and the Stoxx 50 has climbed 6.4 percent. The Euro Stoxx 50 has added 4 percent. So far this year, the Stoxx 600 has increased 10 percent, the Stoxx 50 is up 9.9 percent and the Euro Stoxx has gained 7.7 percent.

To contact the reporter on this story: Kotaro Miyata in London at kmiyata2@bloomberg.net.

Last Updated: June 30, 2005 04:16 EDT