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European Stocks Fall as Investors Weigh ECB Rate Outlook

European stocks declined from a six-year high as a report showing lower-than-estimated inflation in the euro area prompted investors to weigh the outlook for interest rates before Thursday’s European Central Bank meeting.

Pennon Group Plc lost 3 percent after saying pretax profit at its Viridor waste management unit fell about 20 percent. Eutelsat Communications SA slipped 3.7 percent as Abertis Infraestructuras SA sold its holding in the French satellite operator. Wolseley Plc rose 1.6 percent after posting higher sales on improved demand in the U.S. and Nordic region.

The Stoxx Europe 600 Index retreated 0.5 percent to 343.48 at the close of trading. The benchmark gauge added 1.9 percent in May as ECB President Mario Draghi said that the central bank was ready to take action in June if necessary.

“All eyes are on the ECB meeting on Thursday,” Ion-Marc Valahu, a co-founder and fund manager at Clairinvest in Geneva, wrote in an e-mail. “Equities are mostly down as investors do not think that the ECB will do enough.”

Euro-area inflation slowed in May more than economists forecast, cranking up pressure on the ECB to deploy a range of measures to kindle prices and drive growth. The rate fell to 0.5 percent from 0.7 percent in April, the European Union’s statistics office in Luxembourg said today. The median forecast in a Bloomberg News survey was for a decline to 0.6 percent.

Draghi said last month that policy makers were comfortable with taking action at their next meeting. The bank announces its latest monetary policy decision on Thursday.

The volume of shares changing hands in Stoxx 600-listed companies was 21 percent lower than the average of the last 30 days, data compiled by Bloomberg show.

National Indexes

National benchmark indexes declined in 16 of 18 western European markets. France’s CAC 40 fell 0.3 percent, Germany’s DAX retreated 0.3 percent, and the U.K.’s FTSE 100 lost 0.4 percent.

The euro-area jobless rate fell to 11.7 percent in April from 11.8 percent a month earlier, according to Eurostat. Economists had forecast an unemployment rate of 11.8 percent, according to a Bloomberg News survey.

A Chinese purchasing managers’ index from HSBC Holdings Plc and Markit Economics stood at 49.4 in May, missing the 49.7 median forecast in a Bloomberg News survey of analysts. Readings lower than 50 mean that activity contracted.

Pennon slid 3 percent to 760 pence. Pretax profit at its Viridor waste management unit dropped to 27.6 million pounds ($46.2 million), partly due to lower prices for the recyclate it produces. The U.K.-based water and waste company said it remains cautious about the division’s prospects.

Eutelsat Falls

Eutelsat retreated 3.7 percent to 24.79 euros. Abertis sold its 5.1 percent stake in the company at 24.95 euros a share. Rightmove Plc, the property-website operator, slid 3.5 percent to 2,211 pence as a gauge of media-related stocks posted the biggest drop of the 19 industry groups on the Stoxx 600.

Foxtons Group Plc lost 6.6 percent to 307.9 pence. Chief Executive Officer Michael Brown will quit the U.K. real property broker for personal reasons less than a year after its initial public offering. Chief Operating Officer Nic Budden will replace Brown on July 1, the company said today. Brown will remain on the board as a non-executive director.

Barratt Developments Plc fell 1.8 percent to 355.2 pence as a gauge of U.K. construction growth unexpectedly slowed to a seven-month low in May. A purchasing managers’ index for the industry declined to 60 from 60.8 in April, Markit Economics said today in London. Economists had predicted an increase to 61, according to a Bloomberg News survey.

Wolseley rose 1.6 percent to 3,363 pence. The distributor of building materials and bathroom supplies said revenue in the third-quarter through April 30 increased 5.1 percent to 3.05 billion pounds.

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