European stocks retreated the most in two weeks as a report showed that U.S. manufacturing unexpectedly contracted in August.
Vodafone Group Plc fell 2.6 percent after Sanford C. Bernstein & Co. downgraded the world’s second-largest mobile-phone operator. Royal Ahold NV rose 2.5 percent after saying it may sell its 60 percent stake in Scandinavian retailer ICA, possibly through an initial public offering.
The Stoxx Europe 600 Index slid 1.1 percent to 265.43 at the close of trading, its biggest drop since Aug. 22. The equity benchmark has still surged 13 percent from its lowest level this year on June 4 amid speculation that central banks will do more to support growth.
“Investors won’t be willing to do much before the European Central Bank’s meeting on Thursday,” said Henrik Drusebjerg, a senior strategist at Nordea Bank AB in Copenhagen, where he helps oversee $220 billion. The ECB’s president “should reveal details of what he plans to do. There’s a limit to how many times investors are willing to accept no news.”
European stocks advanced the most in a month yesterday as an unexpected drop in Chinese manufacturing increased speculation that the government will announce further stimulus.
In the U.S., a measure of manufacturing activity contracted for a third month. The Institute for Supply Management’s factory index fell to 49.6 in August from 49.8 in July. The median estimate of 70 economists surveyed by Bloomberg had called for a reading of 50, the dividing line between contraction and expansion.
A separate release showed that spending on construction projects dropped in July. Economist had predicted an increase.
National benchmark indexes decreased in 14 of the 18 western-European markets. The U.K.’s FTSE 100 Index fell 1.5 percent. France’s CAC 40 retreated 1.6 percent and Germany’s DAX slid 1.2 percent.
Austria’s government bonds stayed higher as the nation sold 1.2 billion euros ($1.5 billion) of securities, in the first of a series of debt sales by euro-area countries this week. Spain, France and Germany also return to the market.
The ECB sent proposals for a new bond-buying program to national central banks today. The plan involves the ECB buying bonds on the secondary market of countries that ask the euro area’s bailout fund to purchase their debt on the primary market. They must first meet some conditions.
The ECB has lost control of borrowing costs in the euro region, Draghi told lawmakers in a closed-door session at the European Parliament in Brussels yesterday.
The leaders of the single currency’s biggest economies hold further meetings this week as they brace for their central banker’s plan to defend the euro from bond-market turmoil.
European Union President Herman Van Rompuy travels to Berlin for talks with German Chancellor Angela Merkel today, while Italian Prime Minister Mario Monti welcomes French President Francois Hollande to Rome.
Vodafone slid 2.6 percent to 178.45 pence for the biggest contribution to the Stoxx 600’s retreat. Bernstein lowered the telecommunications company to market perform from outperform, meaning that investors should not buy more of the shares.
The brokerage said recent regulatory changes may make Vodafone struggle to meet its organic service revenue growth and margin targets in 2012 and 2013.
Royal Bank of Scotland Group Plc declined 2.6 percent to 220.7 pence as a parliamentary report revealed that the U.K.’s Financial Services Authority will investigate the computer failures that left some of its 17 million customers unable to access their accounts.
Parliament published the correspondence between FSA Chairman Adair Turner, RBS Chief Executive Officer Stephen Hester and Treasury Committee Chairman Andrew Tyrie.
Sanofi sank 3 percent to 64.52 euros as the French drugmaker offered to buy as much as 30 percent of the securities issued in last year’s purchase of Genzyme Corp. Sanofi will buy as many as 86.8 million of the contingent rights at $1.50 to $1.75 each. That’s 7.1 percent to 25 percent above their closing price of $1.40 on Aug. 31.
Volkswagen AG dropped 2.9 percent to 133.50 euros. Europe’s biggest carmaker retreated after a report showed that German car registrations declined 5 percent in August. Bayerische Motoren Werke AG, the largest maker of luxury cars, slid 3.1 percent to 55.39 euros, while Porsche SE slipped 1.6 percent to 39.70 euros.
Nokia Oyj declined 3.4 percent to 2.29 euros as the world’s second-biggest maker of mobile phones said it will start a free music service in the U.S. that will work exclusively on its Lumia handsets.
Ahold climbed 2.5 percent to 10.09 euros, its biggest rally since December, after the Dutch retailer said it will take 6 to 12 months to review options for its stake in ICA. Ahold will probably return at least part of the proceeds from a sale to shareholders in the form of a buyback or special dividend, analysts at SNS Securities NV wrote in a note. They value the stake at 2.1 billion euros to 2.4 billion euros.
Vestas Wind Systems A/S jumped 9.4 percent to 48.50 kroner, its highest price in four months, after SEB AB raised the shares to buy from hold.
DS Smith Plc rose 3.5 percent to 167.6 pence after the British packaging group said that volumes grew faster than gross domestic product in France, Italy and eastern Europe.
Bankia SA advanced 2.9 percent to 1.41 euros as an economy ministry official said that the Spanish state’s rescue fund, FROB, will recapitalize the nationalized lender with Treasury debt rather than cash. The official asked not to be named in line with government policy.
The volume of shares changing hands on the Stoxx 600 was 8.5 percent lower than its average of the last 30 days, according to data compiled by Bloomberg.