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European Stocks Drop Most Since July Before Spain Budget

European stocks slid the most in two months as Spain prepared to present its budget and Federal Reserve Bank of Philadelphia President Charles Plosser said the third round of bond buying may fail to stimulate growth.

Acciona SA (ANA) sank 9.9 percent, leading Spanish builders lower a day before the government presents its budget for next year. Banco Santander SA (SAN), Spain’s largest lender, retreated 4.5 percent. Anglo American Plc (AAL) lost 3.7 percent after saying that it plans to reduce its production of coal.

The Stoxx Europe 600 Index plunged 1.8 percent to 270.72 at the close, its largest drop since July 23. The equity benchmark has still rallied 16 percent from this year’s low on June 4 as European Central Bank policy makers approved a plan to buy the bonds of the most-indebted members of the euro area. European (SXXP) equities trade at 12 times their estimated earnings, close to the highest valuation since 2010.

“Markets have started to turn,” said Andreas Utermann, global chief investment officer at Allianz Global Investors, which oversees $360 billion, in a television interview. “People are facing up to the reality of a macro economy that’s not good. We’ve seen QE3 and now we’re back to the real world. Monetary easing doesn’t necessarily produce growth.”

Plosser said yesterday after the close of European trading that the Fed’s latest round of quantitative easing may jeopardize the central bank’s credibility. The S&P 500 posted its biggest drop since June 25.

Asset Buying

The Federal Open Market Committee said on Sept. 13 that it will buy mortgage-backed securities at a pace of $40 billion per month until the labor market improves. Policy makers have turned to unconventional tools to attack unemployment that has stayed above 8 percent since February 2009.

In Spain, Prime Minister Mariano Rajoy has struggled to persuade people to accept the deepest austerity measures on record. Unions and protest groups, spurred by the Portuguese government’s decision to drop a planned tax increase following demonstrations, have demanded a referendum on Rajoy’s cuts.

Economy Minister Luis de Guindos will present additional measures tomorrow that the European Commission requires as part of efforts to bring down Spain’s borrowing costs. Budget Minister Cristobal Montoro will unveil the 2013 budget.

In Greece today, public- and private-sector workers will hold a 24-hour general strike.

National benchmark indexes fell in every western-European market except for Greece. Spain’s IBEX 35 Index (IBEX) sank 3.9 percent, France’s CAC 40 tumbled 2.8 percent and Germany’s DAX slid 2 percent. The U.K.’s FTSE 100 lost 1.6 percent.

Construction Companies

Acciona slumped 9.9 percent to 45.09 euros, its biggest tumble since November 2008, while Actividades de Construccion & Servicios SA, Spain’s biggest construction company, lost 5.8 percent to 15.97 euros. Obrascon Huarte Lain SA (OHL) slid 5.3 percent to 18.51 euros. Ferrovial SA (FER) declined 4.9 percent to 9.70 euros.

The IBEX 35 rallied 37 percent from this year’s low through yesterday. Acciona surged 64 percent over that time, while ACS soared 56 percent and OHL jumped 29 percent.

A gauge of banks contributed the most to the Stoxx 600’s retreat as Spanish lenders slid. Santander sank 4.5 percent 5.92 euros, while Banco Bilbao Vizcaya Argentaria SA (BBVA) declined 4.8 percent to 6.20 euros. The yield on Spain’s benchmark 10-year bonds climbed above 6 percent today as the securities retreated the most this month.

Anglo American declined 3.7 percent to 1,831 pence after saying that it plans to cut coal production in the short term.

BHP Billiton Ltd. (BHP), the world’s biggest mining company, retreated 2.4 percent to 1,908 pence. Rio Tinto Group, the third-largest, dropped 3.4 percent to 2,841 pence. Copper, lead, nickel and tin fell in London trading.

Infineon, ICAP

Infineon Technologies AG (IFX) slipped 3.4 percent to 4.94 euros, declining for an eighth day. Jefferies Group Inc. cut its recommendation on Europe’s second-biggest semiconductor maker to underperform from hold, meaning investors should sell the shares. The stock slumped 6.1 percent yesterday after Infineon forecast sales and profitability will decline in the three months through December.

ICAP Plc (IAP) tumbled 3.3 percent to 332.5 pence. The world’s largest broker of transactions between banks predicted that fiscal first-half revenue will drop 14 percent from the previous year because of reduced activity on capital markets.

CGGVeritas (GA) decreased 1.9 percent to 24.93 euros. The company started a 414 million-euro ($532 million) rights offer to help finance its acquisition of Fugro NV’s seismic division. The largest seismic surveyor of oilfields said it will sell the new stock at 17 euros a share.

Technip, Statoil

Technip SA (TEC), Europe’s second-largest oilfield-services provider, retreated 2.4 percent to 86.86 euros.

Statoil ASA (STL) dropped 2.8 percent to 149.20 kroner. Norway’s national oil company was cut to sell from buy at Nordea Bank AB.

Myriad Group AG (MYRN), a software developer, plunged 14 percent to 2.09 Swiss francs. The company announced a 10 million-franc ($10.6 million) fully underwritten rights issue and said that Chief Executive Officer Simon Wilkinson has resigned. Myriad also reported a first-half net loss of $23.3 million.

Neopost SA (NEO) rose 2.9 percent to 40.58 euros. The maker of mailing equipment reported first-half net income that climbed 25 percent to 79.2 million euros. The company also said it aims to keep its 2012 dividend at a “high level.”

Imagination Technologies Group Plc (IMG), a U.K. designer of parts for Apple Inc.’s iPhone, slumped 9.6 percent to 470 pence.

Texas Instruments Inc. said it will spend less on its products for mobile devices, shifting its investments to embedded technology such as safety systems in cars.

The number of shares changing hands on the Stoxx 600 was 9.3 percent greater than the average of the last 30 days, according to data compiled by Bloomberg.

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

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

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