Dec. 21 (Bloomberg) -- European stocks fell, led by banks, as economic reports in Germany and a measure of housing prices in the U.K. suggested profit growth in the region may slow. Deutsche Bank AG, HVB Group and HBOS Plc declined.

U.K. cigarette makers including British American Tobacco Plc and Gallaher Group Plc dropped as laws restricting the size of advertisements in the country took effect today. Bayer AG slipped after a U.S. health institute halted a study of a generic Alzheimer's drug, which the German company sells.

The Dow Jones Stoxx 50 Index slipped 0.3 percent to 2763.19 as of 12:15 p.m. in London. The Stoxx 600 lost 0.2 percent and the Euro Stoxx 50, a benchmark for the 12 countries using the euro, added less than 0.1 percent.

``Our expected profit increase for next year is already priced into markets,'' said Maes van Lanschot, who oversees 120 billion euros ($160 billion) in assets as chief investment officer for ING Investment Management. ``We expect profit to rise between 6 percent and 8 percent next year.''

The Ifo institute and HWWA, two of Germany's six leading economic institutes, cut their growth forecasts for Europe's largest economy, saying investment and consumer spending won't recover enough to offset a slowdown in exports. The European Forecasting Network, a group of seven research institutes, yesterday said the region's economy will grow 1.7 percent this year and next. In October, it predicted an expansion of 1.8 percent and 1.9 percent respectively.

Deutsche Bank, HVB

Deutsche Bank, Europe's third-biggest bank by assets, fell 0.6 percent to 63.89 euros. HVB Group, Germany's No. 2 bank, lost 1.1 percent to 17.04 euros.

Benchmarks climbed in 11 of the 18 Western European markets. Germany's DAX Index rose less than 0.1 percent, as did France's CAC 40 Index. The U.K.'s FTSE 100 Index rose 0.2 percent. March futures on the Euro Stoxx 50 added 0.3 percent.

HBOS, the U.K.'s largest mortgage lender, declined 0.5 percent to 883 pence and Barclays Plc, the country's No. 3 bank by assets, slid 0.9 percent to 567 pence. The Royal Institution of Chartered Surveyors said its index measuring changes in U.K. house prices fell in the three months through November to the lowest since December 1992, suggesting a decline in the nation's property market is deepening.

SEC Investigation

UBS AG, the biggest bank in Europe by assets, fell 0.9 percent to 95.2 Swiss francs. It said the U.S. Securities and Exchange Commission is ``considering recommending'' bring civil charges against it over work the bank did for HealthSouth Corp., whose founder faces trial on allegations he masterminded a $2.7 billion accounting fraud.

The Zurich-based bank said it is ``cooperating fully'' with the SEC and other agencies investigating HealthSouth.

British American Tobacco, the world's second-largest cigarette maker, fell 1 percent to 881 pence. Gallaher Group Plc, the maker of Benson & Hedges and Silk Cut cigarettes, dropped 1.6 percent to 782 pence.

The companies must restrict their advertisements under new U.K. rules aimed at discouraging people from smoking. They are only allowed to advertise in stores, pubs and clubs, and from today those ads must be the size of a paperback book or smaller, according to a Department of Health statement. Thirty percent of the space must be used for a health warning.

Alzheimer's Drug

Shares of Bayer slid 0.6 percent to 25.02 euros after a U.S. health institute halted a study of the generic naproxen drug, which the German drugmaker sells. The U.S. National Institutes of Health halted an Alzheimer's prevention study of Pfizer Inc.'s Celebrex painkiller and naproxen because of a heart risk.

BHP Billiton, the world's biggest miner, gained 0.9 percent to 599 pence. Rio Tinto Group, the No. 3 mining company, gained 1.6 percent to 1,493 pence as copper futures neared a 16-year high in London.

Copper for delivery in three months rose 1.2 percent to $3,054 a metric ton on the London Metal Exchange after stockpiles of the metal reached a 14-year low amid forecasts that growing demand will outpace production in 2005. Demand for copper in China, the world's biggest user the metal, will increase by 15 percent this year and 10 percent in 2005, Barclays Capital forecast last week.

``Metal prices are going to stay high next year because China is going to keep producing lots of cheap goods,'' said Andy Brough, a fund manager at Schroder Investment Management in London, which has $6.5 billion in assets. ``Anything related to China is going to do okay.''

Fiat Climbs

Automotive-related companies gained 0.5 percent as a group, making them the third-biggest gainer among the six gaining sub- indexes on the Stoxx 600. Fiat SpA paced advancers, adding 1.6 percent to 5.76 euros.

Italy's largest manufacturer's option to sell its car-making unit to General Motors Corp. may be worth as much as $3.6 billion, Italian daily La Repubblica reported, citing a report by analysts at Citigroup Inc. Porsche AG, the luxury carmaker, climbed 0.9 percent to 488 euros.

Woolworths Group Plc, the owner of a chain of U.K. outlets that sells products ranging from children's clothes to video games, dropped 2.9 percent to 41.25 pence. The share was downgraded to ``neutral'' from ``overweight'' by analysts at JPMorgan & Chase Co., who said the retailer's Christmas sales and profit margin may decline.

Mediobanca SpA, Italy's biggest investment bank, increased 2.7 percent to 11.87 as analysts at UBS raised their recommendation to ``buy'' from ``neutral.''

Harry Potter

Bloomsbury Publishing Plc, the U.K. publisher of the Harry Potter books, climbed 7.5 percent to 294 pence after author J.K. Rowling said she finished the manuscript of the sixth book in the series.

Travis Perkins Plc slid 1.4 percent to 1,683 pence. The U.K.'s third-largest supplier of building materials was cut to ``hold'' from ``buy'' by Citigroup Inc. Analysts at Merrill Lynch & Co. lowered their rating to ``sell'' from ``neutral.''

Persimmon Plc, Britain's biggest homebuilder by market value, gained 3.8 percent to 704.5 pence after saying full-year profit will probably rise to a record after it built more homes and prices rose. Results will be in line with analyst estimates, the company said in a statement today.

Alma Media Oyj, Finland's No. 2 media company, surged 20 percent to 11.25 euros after Schibsted ASA, Norway's biggest media company, offered to buy the company for 705 million euros to expand in the Nordic region. Schibsted shares rose 0.6 percent to 174 Norwegian kroner.

French household spending rose the most in five months in November as shoppers bought more cars and home appliances in Europe's third-largest economy, underpinning expectations for a recovery in consumer demand this quarter.

Purchases of manufactured goods rose 1.5 percent from October, when it climbed a revised 0.6 percent, Paris-based statistics office Insee said today. Economists polled by Bloomberg News expected a 0.1 percent gain, according to the median of 23 forecasts. The annual increase was 6.5 percent, up from the previous month's 1.9 percent.

To contact the reporter on this story: Margo Towie in Brussels at mtowie@bloomberg.net.

Last Updated: December 21, 2004 07:20 EST