European Stocks Fall After Chinese Inflation Report

European stocks slipped for a second day as an inflation report led to concern that China has less room for monetary easing, while the trade deficit of the U.S. unexpectedly widened.

BHP Billiton Ltd. slid 2.7 percent, the biggest contribution to the Stoxx Europe 600 Index’s slide. Tullow Oil Plc sank 3.2 percent after saying it will write off $299 million in 2012. SAP AG gained 1.2 percent after unveiling the most significant overhaul of its enterprise software in two decades.

The Stoxx 600 lost 0.1 percent to 287.08 at the close in London. The equity benchmark declined 0.3 percent this week. The volume of shares changing hands on the Stoxx 600 shares was 19 percent greater than the 30-day average, according to data compiled by Bloomberg.

“The Chinese inflation report is what is weighing on equities today as it has some investors worried that it could limit the degree of further stimulus in China,” Mark Andersen, co-head of asset allocation at UBS AG in Zurich, said in a telephone interview. “We still think the positive growth momentum is supportive of markets. We’re seeing a synchronized pickup of growth on a global basis, providing investors with an underlying positive sentiment.”

Trade Deficit

In the U.S., a Commerce Department release showed that the country’s trade deficit widened to $48.7 billion in November from a revised $42.1 billion in October. The median forecast of 69 economists in a Bloomberg survey had called for a deficit of $41.3 billion.

China’s inflation accelerated more than forecast to a seven-month high, limiting room for monetary easing to support the recovering economy. The consumer price index rose 2.5 percent in December from a year earlier, exceeding the 2.3 percent median estimate of 42 economists.

Higher inflation means tighter monetary policy, a stronger currency to limit imported inflation, less liquidity and higher rates in the second half of the year, said Dariusz Kowalczyk, a Hong Kong-based strategist at Credit Agricole CIB.

In Japan, the Cabinet Office said the government will spend 10.3 trillion yen ($115 billion) to drag the economy out of its third recession in the last five years. The stimulus will increase gross domestic product by about 2 percentage points and create some 600,000 jobs, according to the statement.

Manufacturing Production

In the U.K., a report showed manufacturing production unexpectedly dropped in November. Factory output decreased 0.3 percent from October. The average estimate compiled by Bloomberg News had called for it to increase 0.5 percent.

A gauge of European mining shares posted the biggest drop of the 19 industry groups in the Stoxx 600, slumping 1.7 percent. BHP Billiton, the world’s largest mining company, declined 2.7 percent to 2,075 pence, its biggest slide since August. Rio Tinto Group lost 1.2 percent to 3,468 pence. Anglo American Plc, which named Mark Cutifani as its new chief executive officer on Jan. 8, dropped 1.5 percent to 2,042 pence.

Tullow Oil slumped 3.2 percent to 1,186 pence. The U.K. explorer focusing on Africa and Latin America said it more than doubled write-offs from exploration in 2012 because of unsuccessful wells in Ghana, Guyana and Suriname.

Acciona SA slipped 2.9 percent to 62.86 euros after HSBC Holdings Plc downgraded the company to neutral from overweight, meaning that investors should not buy more of the shares. HSBC cited clarity on renewable levies in Spain and contract wins for Acciona’s water division. The shares surged 113 percent from July through yesterday, while the IBEX gained 45 percent.

SAP Gains

SAP climbed 1.2 percent to 61.32 euros. The world’s largest maker of enterprise software unveiled a faster version of its Business Suite applications at an event in Palo Alto, California. SAP executives said they aim to replace software from Oracle, Microsoft Corp. and International Business Machines Corp. that customers use to process and analyze information.

Cap Gemini SA added 2.3 percent to 34.29 euros as rival IT outsourcing company Infosys Ltd. jumped the most since its initial public offering in 1993 in Mumbai trading after raising its full-year sales forecast.

Jeronimo Martins SGPS SA surged 6.1 percent to 15.57 euros, its biggest gain in five months. Portugal’s biggest retailer said sales rose 11 percent in 2012. The company said on Dec. 11 that revenue would grow by at least 10 percent a year in the three years through 2015.

National benchmark indexes gained in 11 of the 18 western-European markets. France’s CAC 40 and Germany’s DAX both advanced 0.1 percent, while the U.K.’s FTSE 100 added 0.3 percent.

The VStoxx Index, which measures volatility on the benchmark Stoxx Europe 50 Index, dropped 3.4 percent to 15.57, its lowest since June 2007.

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