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European Stocks Drop From Five-Month High; Saint-Gobain, BP Fall

L'Oreal Cosmetics
L’Oreal SA, the world’s biggest cosmetics maker, dropped 2.5 percent as Morgan Stanley cut its recommendation on the stock. Photographer: Fabrice Dimier/Bloomberg

European stocks retreated from a five-month high as U.S. home sales rose less than forecast, adding to concern that gains in equities have outpaced the outlook for economic growth.

Cie. de Saint-Gobain, Europe’s largest building-materials supplier, led construction shares lower, falling 2 percent. BP Plc paced losses in oil and gas shares. National Bank of Greece SA rose for an eighth day as talks between Greek officials and private creditors entered a third day.

The benchmark Stoxx Europe 600 Index slipped 0.3 percent to 255.85 at the close of trading, having earlier fallen as much as 0.6 percent. The gauge has still advanced 4.6 percent in 2012, the best start to a year since 1997, according to data compiled by Bloomberg.

“Most indexes have already risen as much as they were expected to for the whole year, so naturally investors are getting a bit cautious,” said Witold Bahrke, a senior strategist at PFA Pension A/S in Copenhagen, which manages $45 billion. “Politicians are digging in to do the dirty work, which will create some turbulence in the week to come.”

The Stoxx 600 rose 2.7 percent this week, a fifth straight advance, amid signs the U.S. economy is recovering, Europe will contain its debt crisis and speculation that China will ease lending curbs to spur economic growth.

National benchmark indexes fell in 12 of the 18 western European markets today. France’s CAC 40, the U.K.’s FTSE 100 and Germany’s DAX Index all slid 0.2 percent. Greece’s ASE rallied 2.7 percent to a two-month high.

Greek Talks

Greek officials and private creditors met for a third day to seek agreement on a debt swap. European officials and bondholders agreed in October to implement a 50 percent cut in the face value of Greek debt by voluntarily exchanging outstanding bonds for new securities, with a goal of reducing borrowings to 120 percent of gross domestic product by 2020.

The government and creditors reached an initial agreement for a voluntary swap of Greek debt, Proto Thema reported on its website, without saying how it got the information. The parties agreed that new bonds to replace existing Greek debt would be of a 30-year maturity and carry a coupon beginning at 3.1 percent, reach 3.9 percent and go as high as 4.75 percent, the Athens-based newspaper said.

“It’s possible we’ll have something to say later tonight,” Charles Dallara, managing director of the International Institute of Finance, said in Athens today after meeting with Prime Minister Lucas Papademos. He declined to comment further.

‘Overbought’ Shares

The Stoxx 600 became “overbought” for the first time in 14 months yesterday, as the 14-day Relative Strength Index, which tracks momentum by comparing closing prices with daily trading ranges, rose to 70.47. When the RSI climbs above 70, some technical analysts say the underlying security is likely to fall.

Sales of previously owned U.S. homes rose increased 5 percent to a 4.61 million annual rate in December, the National Association of Realtors said today. The pace was less than the 4.65 million median forecast of economists surveyed by Bloomberg News.

Saint-Gobain slid 2 percent to 33.89 euros as a gauge of construction companies in the Stoxx 600 dropped the most in two weeks. Assa Abloy AB, the world’s largest lockmaker, retreated 3.8 percent to 180.60 kronor in Stockholm.

BP Drops

BP, the U.K.’s second-largest oil company, dropped 3.1 percent to 467.45 pence as crude declined for a third day in New York trading. Petrofac Ltd. fell 4.3 percent to 1,440 pence, dropping for a sixth day, as JPMorgan Chase & Co. downgraded the shares.

Meyer Burger Technology AG, the biggest maker of solar-panel manufacturing equipment, sank 6.6 percent to 17.8 Swiss francs as Germany said it will increase the frequency of cuts to solar subsidies. Solarworld AG slid 6.5 percent to 4.04 euros in Frankfurt trading.

Novartis AG fell 4 percent to 52.05 Swiss francs as the European Medicines Agency started a review of the Swiss drugmaker’s Gilenya pill for multiple sclerosis after 11 deaths among patients.

National Bank of Greece, the country’s largest lender, added 5 percent to 1.89 euros. Alpha Bank SA and EFG Eurobank Ergasias SA rose 7.1 percent to 67 euro cents and 6.4 percent to 45 cents, respectively. Commerzbank AG, Germany’s second-largest bank added 6.3 percent to 1.72 euros.

EBA Deadline

Banks had until the end of today to tell national regulators how they plan to meet capital targets drawn up by the European Banking Authority. The proposals will be discussed at meetings in London on Feb. 8-9.

Vodafone Group Plc gained 1.5 percent to 177.05 pence after India’s Supreme Court said the mobile-phone company isn’t liable for more than $2 billion in taxes on the 2007 acquisition of Hutchison Whampoa Ltd.’s wireless operations in the South Asian country.

KBC Groep NV rallied 8.8 percent to 12.60 euros, a fourth day of gains, after agreeing to sell its Polish insurance unit to Talanx International AG.

Solvay SA added 3.4 percent to 75.46 euros after the stock was raised to “buy” from “neutral” at Nomura Holdings Inc.

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