June 30 (Bloomberg) -- European energy stocks, this year's best-performing industry, fell as oil traded near a two-week low in New York. BP Plc and Royal Dutch Petroleum Co. declined.

``We've had the run for the moment,'' said Michael Hughes, chief investment officer at Baring Asset Management in London, which oversees $36 billion. The record $60.95-a-barrel oil price reached on June 27 ``may be the peak.''

France Telecom SA paced a gain among phone companies as Smith Barney advised investors to buy the shares. Industrial- goods stocks slid after ABB Ltd., the world's biggest maker of power transformers, cut its full-year profit forecast.

The Dow Jones Stoxx 600 Index lost 0.05 percent to 276.66 as of 12:06 p.m. in London. The Stoxx 50 added 0.03 percent, while the Euro Stoxx 50, a gauge for the 12 countries using the euro, increased 0.2 percent.

Trading was below average amid expectations 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 are ``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 gained in 12 of the 18 Western European markets. The U.K.'s FTSE 100 Index and Germany's DAX Index both added 0.2 percent. France's CAC 40 Index slipped less than 0.1 percent. Denmark's KFX Index fell the most, down 0.4 percent, while Greece's ASE General Index was the best performer with a 0.7 percent advance.

Oil Price Drops

The number of shares changing hands in the U.K., Germany and France, Europe's biggest stock markets, was about a third of the daily average this year, according to data compiled by Bloomberg.

BP, Europe's biggest oil company, slipped 0.6 percent to 583.5 pence. Royal Dutch Petroleum, which owns 60 percent of the Royal Dutch/Shell Group, decreased 0.4 percent to 53.8 euros.

Crude oil for August delivery lost 0.3 percent to $57.10 a barrel on the New York Mercantile Exchange. The contract yesterday fell 1.6 percent to 57.26 a barrel, having traded as low as $56.90.

The Stoxx 600 Oil & Gas Index is the best-performing of 18 industry groups in the broader measure this year, surging 23 percent. Crude-oil futures in New York, which have gained 32 percent in 2005, have dropped 6.3 percent from their record high.

Telecom Stocks

France Telecom, Europe's second-largest phone company, added 2.1 percent to 24.3 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.

The Stoxx 600 Telecom Index, the worst-performing industry group in 2005, rose 1 percent. The gauge extended yesterday's 1.8 percent advance, which came after France Telecom said it will more than double its dividend for this year.

Deutsche Telekom AG, Europe's biggest phone company, increased 1.6 percent to 15.33 euros. BT Group Plc, the largest British phone company, rose 1.8 percent to 232.25 pence.

Adrian Darley, a fund manager at Gartmore Investment Management Ltd. in London, said he recently bought Deutsche Telekom shares. The company ``stands out in a market where we're not seeing a lot of opportunities across Europe,'' he said. Gartmore manages the equivalent of $85 billion.

Industrial Goods

ABB tumbled 7.3 percent to 8.3 Swiss francs, the sharpest fall in the Stoxx 600. The Zurich-based company said second- quarter net income will drop from the previous period.

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.

``The profit warning was a bit of a surprise,'' said Plinio Zanetti, a fund manager at Bank Hofmann AG in Zurich, which oversees about $16 billion. ``When news like this comes out it has an impact.'' Bank Hofmann owns fewer ABB shares in their Swiss fund than are represented in benchmarks, Zanetti said.

Siemens AG, the world's second-largest maker of power- generation turbines, lost 0.5 percent to 60.58 euros. Sandvik AB, the biggest maker of metal-cutting tools, lost 1.5 percent to 291.5 Swedish kronor.

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.

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.

Ratings Downgrades

Nokia Oyj, the world's biggest mobile-phone maker, slid 0.9 percent to 13.98 euros. Dresdner Kleinwort Wasserstein cut its recommendation to ``sell'' from ``hold,'' citing increasing competition from companies such as Motorola Inc.

HSBC Holdings Plc, Europe's biggest bank by market value, dropped 0.5 percent to 890.5 pence after Morgan Stanley downgraded the shares to ``underweight'' from ``equal-weight'' because rising interest rates will hurt earnings.

RWE AG, Germany's largest electricity producer, increased 1.5 percent to 53.06 euros. Dresdner Kleinwort Wasserstein raised its share-price forecast to 64 euros from 54 euros, saying higher power prices will lift earnings.

Pernod Ricard SA declined 1.1 percent to 130.7 euros. Shareholders of world's third-largest liquor maker approved a plan to sell new shares to finance the company's 7.6 billion- pound ($13.7 billion) purchase of Allied Domecq Plc.

Amec Plc, the world's third-biggest engineering-services business, dropped 3.5 percent to 333.5 pence. The company said it expects average weekly net debt to increase to about 400 million pounds ($718 million) for the full year from 380 million pounds in the first half because of acquisitions.

Share Sale

Banca Nazionale del Lavoro SpA, the Italian lender that Spains Banco Bilbao Vizcaya Argentaria SA is seeking to buy, climbed 2.8 percent to 2.88 euros. Compagnia Assicuratrice Unipol SpA, Italy's fourth-biggest insurer by premiums, will make an offer for the Rome-based bank, la Repubblica reported, without saying where it got the information. The report has ``no foundation, Unipol said in a statement released by the Italian exchange.

Ebro Puleva SA, Spain's largest publicly traded food company, retreated 3 percent to 14.6 euros. Compania Andaluza de Rentas e Inversiones SA sold a 3 percent stake in the company, for 66 million euros, according to a filing by its broker.

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

Last Updated: June 30, 2005 07:07 EDT