Sept. 2 (Bloomberg) -- European stocks dropped, led by exporters DaimlerChrysler AG and Michelin & Cie. as the dollar fell to a three-month low against the euro, stoking concern a weaker U.S. currency will erode corporate profits.

``The weak dollar hits our economy at the worst possible moment,'' said Boris Boehm, who is part of a team managing about $980 million at Hamburg-based Nordinvest. ``We had just seen the first signs of a small recovery. It hits our export- related companies.'' Boehm holds utilities and energy stocks.

L'Oreal SA, the world's largest cosmetics maker, dropped after reporting profit that missed estimates.

The Dow Jones Stoxx 600 Index lost 0.3 percent to 285.95 as of 11:14 a.m. in London. The Stoxx 50 fell 0.4 percent, as did the Euro Stoxx 50, a benchmark for the 12 countries using the euro.

Benchmark indexes dropped in 11 of the 18 Western European markets that were open. Germany's DAX Index increased 0.2 percent, while the U.K.'s FTSE 100 Index and France's CAC 40 both rose 0.1 percent.

Indexes extended declines after the Sky News reported a series of ``massive explosions'' rocked the New Orleans riverfront a few miles south of the city's French Quarter. Sky News cited the Associated Press.

Among economic data today, U.S. employers probably added 190,000 jobs in August, signaling a confidence in the world's largest economy that will be tested by the further surge in fuel prices following Katrina. The report is scheduled for 8:30 a.m. in Washington.

The dollar fell to a three-month low against the euro on speculation the Federal Reserve will pause in its campaign of interest-rate increases. The dollar weakened to $1.2571 at 11:09 a.m. in London from $1.2501 late yesterday in New York, according to electronic currency dealing system EBS.

Daimler, Air France

DaimlerChrysler declined 1.9 percent to 40.41 euros. The world's fifth-biggest carmaker makes 45 percent of its sales in the U.S. Michelin, the world's biggest tiremaker, slipped 1.3 percent to 48.85 euros. North America accounts for almost 40 percent of revenue.

L'Oreal dropped the most in four months, sliding 3.7 percent to 63.75 euros. The company said profit fell 5.8 percent to 892 million euros in the first half as earnings from the company's stake in drugmaker Sanofi-Aventis were stripped out after a takeover. A Bloomberg survey of seven analysts showed a median estimate of 918 million euros.

Air France, Diageo

Air France-KLM Group jumped 3.8 percent to 13.80 euros. Europe's biggest airline raised its full-year forecast after first-quarter profit rose 26 percent to 110 million euros ($137 million) as fares and traffic grew. Profit lagged the 121 million-euro estimate of analysts surveyed by Bloomberg.

Full-year operating profit will probably rise ``significantly above the 2004-2005 level,'' the airline said. The company said May 19 that fiscal-year operating profit, or earnings before interest, tax and one-time gains from aircraft sales, would be little changed.

The airlines ``are able to compensate'' for higher oil prices, said Yann Azuelos, who helps manage more than $3 billion at Meeschaert Asset Management in Paris and bought more Air France shares today. ``People are ready to pay. The big players in the industry will reap the benefits.''

British Airways Plc, Europe's third-biggest airline, gained 0.6 percent to 279.75 pence. Deutsche Lufthansa AG, the second-largest, added 0.7 percent to 10.86 euros.

Crude oil for October delivery fell 0.7 percent to $69 a barrel on the New York Mercantile Exchange after gaining 0.8 percent yesterday. The price reached a record $70.85 on Aug. 30.

BOC, Diageo

Shares of BOC Group had their biggest gain in two years, rising 4.2 percent to 1,130 pence. BASF may make a 1,300 pence- a-share cash offer to buy BOC, the newspaper reported, citing no one.

BOC spokesman Nigel Abbott and BASF's Daniel Smith both said their companies don't comment on speculations.

Diageo Plc, the world's largest distiller, added 0.0 percent to 812.5 pence. Merrill Lynch & Co. raised its recommendation on the company's shares to ``neutral'' from ``sell.''

Empire Online Ltd., which helps gaming Web sites such as EmpirePoker.com win customers, rose 5.9 percent to 270 pence. The company said it has been approached about a takeover worth 790.5 million pounds ($1.5 billion).

Wetherspoon

J.D. Wetherspoon Plc, the U.K. operator of about 650 city- center bars, dropped 3 percent to 282.75 pence. The company reported annual profit dropped 17 percent as slower economic growth led Britons to rein in spending. Net income fell to 24.3 million pounds ($44.7 million) in the year ended July 24 from 29.3 million pounds a year earlier.

Yesterday, the Dow Jones Industrial Average slid 0.2 percent and the Standard & Poor's 500 added 0.1 percent.

Asian stocks rose on expectations the U.S. Federal Reserve will end its interest-rate increases next month to support growth. The Morgan Stanley Capital International Asia-Pacific Index, which tracks more than 900 stocks in the region, added 0.5 percent. The Nikkei 225 Stock Average advanced 0.6 percent.

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

Last Updated: September 2, 2005 06:22 EDT