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European Stocks Decline; Carmakers, Miners, Lenders Lead Losses

European stocks fell, snapping a three-day rally, as declines in carmakers and mining companies outweighed optimism that an easing in Italy’s borrowing costs indicated the region’s debt crisis won’t deepen.

Bayerische Motoren Werke AG (BMW), the world’s biggest maker of luxury cars, lost 3.3 percent. Deutsche Bank AG (DBK) and Commerzbank AG (CBK), Germany’s biggest lenders, slid at least 3 percent. Tesco Plc (TSCO), the U.K.’s largest supermarket chain, jumped 2.3 percent.

The Stoxx Europe 600 Index dropped 0.7 percent to 240.20 at the close in London. The gauge rallied 2 percent in the previous three sessions as investors turned attention from the debt crisis to U.S. data that showed the recovery in the world’s largest economy is gathering pace.

Stocks erased gains after a report said the European (SXXP) Central Bank’s balance sheet soared to a record after it lent financial institutions more money last week in an attempt to keep credit flowing to the economy during the debt crisis.

“The euphoria from this morning was quickly replaced once people realized that the ECB balance sheet was bigger than expected which once again kind of sets a negative tone that the crisis is maybe worse than expected,” Ken Polcari, a managing director at ICAP Plc’s equities unit in New York, said in a Bloomberg TV interview.

Lending to euro-area banks jumped 214 billion euros ($280 billion) to 879 billion euros in the week ended Dec. 23, the Frankfurt-based ECB said in a statement today. Its balance sheet increased 239 billion euros to 2.73 trillion euros.

Italian Debt Auction

Italy today sold 9 billion euros of six-month Treasury bills at half the yield it agreed to pay at an auction of the securities last month. The Rome-based Treasury sold the 179-day bills at a rate of 3.251 percent, down from 6.504 percent on Nov. 25. Demand was 1.7 times the amount for sale, compared with 1.47 times last month.

Italy also sold 1.733 billion euros of 2013 notes today to yield 4.853 percent, compared with a yield of 7.814 percent at the last auction on Nov. 25. The bid-to-cover ratio was 2.24, compared with 1.59 last month. Tomorrow Italy will auction four different securities, including a 10-year bond.

“Tomorrow is really the longer-term money that Italy has to raise,” Polcari said. “Are they going to be lucky enough tomorrow as they were today with the short-term money? I think the market is telling you it’s a little bit concerned.”

U.K. Job Market

Britain faces the “toughest” job market in two decades with the number of working people likely to fall by 120,000 in 2012, the Chartered Institute of Personnel and Development said.

“The U.K. jobs market will be weaker than at any time since the recession of the early 1990s,” John Philpott, chief economic adviser at the CIPD, an association for human-resource professionals, said in a statement. “The combination of worsening job shortages for people without work, mounting job insecurity and a further fall in real earnings for those in work may test the resilience and resolve of the U.K. workforce far more than it did in the recession of 2008-9.”

Greece will hold national elections at the end of April, state-run Athens News Agency reported, citing Finance Minister Evangelos Venizelos. The new poll date provides the government of Prime Minister Lucas Papademos more time to complete a new financing agreement and a debt swap, the newswire reported.

National benchmark indexes declined in 13 of the 18 western European markets today. Germany’s DAX fell 2 percent, while France’s CAC 40 lost 1 percent. The Swiss Market Index added 0.1 percent.

BMW fell 3.3 percent to 51.10 euros and Porsche AG dropped 3.1 percent to 40.88 euros. Daimler AG slid 3.9 percent to 33.07 euros.

German Banks

Deutsche Bank and Commerzbank declined 3.8 percent to 28.63 euros and 4.2 percent to 1.27 euros respectively.

Xstrata lost 2.1 percent to 958.8 pence. Copper retreated in London after a report that industrial production declined in Japan, curbing demand for base metals. Petropavlovsk Plc (POG) dropped 2.8 percent to 618 pence and Salzgitter AG (SZG) slid 2.6 percent to 37.90 euros.

Tesco gained 2.3 percent to 399.8 pence pacing gains among European retailers. Debenhams Plc (DEB) added 1.5 percent to 57.5 pence, while Home Retail Group Plc (HOME), the owner of U.K. Homebase outlets, rallied 4.8 percent to 86.8 pence.

U.K. shopper numbers for the Boxing Day of Dec. 26 rose 22 percent from a year earlier, market researcher Experian FootFall reported yesterday.

To contact the reporter on this story: Corinne Gretler in Zurich at cgretler1@bloomberg.net

To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net

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