European Stocks Fall From 4 1/2-Year High on Italy Cut

European stocks fell from a 4 1/2-year high as Fitch Ratings downgraded Italy and China’s retail sales and industrial output missed forecasts.

Storebrand ASA slumped 6.6 percent after Norway’s second-largest insurer said it must set aside money to meet stricter rules on group pension plans. OMV AG and ICAP Plc dropped more than 1.5 percent as analysts downgraded the shares. Ladbrokes Plc jumped the most in 11 months after signing a deal with Playtech Ltd. to develop its Web business.

The Stoxx Europe 600 Index slipped 0.1 percent to 295.26 at the close of trading. The gauge has still surged 5.6 percent this year as U.S. lawmakers agreed on a compromise budget and optimism grew that central banks around the world will continue stimulus measures to support the economic recovery.

“The downgrade in Italy will lead to some nervousness that more intervention will be needed, especially as it is clear that Cyprus also needs a bail out.” Felicity Smith, a London-based fund manager at Bedlam Asset Management Plc, which oversees about $500 million, wrote in an e-mail. “Ultimately, Germany will be the main contributor to the cost of this. I just see today’s downgrade as a bit of realism returning to the market, rather than a reason to panic.”

The Stoxx 600 rallied 2.3 percent last week, the biggest advance in two months, as employers in the U.S. increased payrolls more than forecast and optimism mounted that central banks will continue to stimulate their economies. The index closed at the highest level since June 2008.

Volume Declines

National benchmark indexes fell in 10 of the 18 western European markets. France’s CAC 40 slipped 0.1 percent, while the U.K.’s FTSE 100 rose 0.3 percent. Germany’s DAX was little changed. The number of shares changing hands in companies listed on the Stoxx 600 was 25 percent lower than the 30-day average today, data compiled by Bloomberg show.

Fitch cut Italy’s credit rating by one level after the close of equity markets on March 8, as last month’s election produced political paralysis that threatens the country’s ability to respond to a recession and the European debt crisis.

The rating company lowered Italy’s government bond rating to BBB+ from A- with a negative outlook. That’s three levels above junk and one higher than Spain, according to data compiled by Bloomberg.

“The Italian downgrade has taken some of the wind out of the market’s sails, reminding investors that the European situation remains largely unresolved,” Richard Hunter, head of U.K. equities at Hargreaves Lansdown Plc in London, wrote in an e-mail.

European Union leaders will meet for a March 14-15 summit in Brussels to discuss financial-rescue terms for Cyprus, including the island nation’s debt sustainability and possibly imposing losses on depositors.

China Economy

In China, retail sales increased 12.3 percent in the first two months of 2013 from a year earlier and industrial production rose 9.9 percent, the National Bureau of Statistics said. Both numbers trailed economists’ estimates.

French industrial production fell in January as Europe’s second-largest economy teetered on the brink of its third recession in four years. Output dropped 1.2 percent from December, more than the 0.2 percent decline forecast by economists in a Bloomberg survey.

Storebrand slid 1.78 kroner to 25.23 kroner as stricter pension rules will require the insurer to set aside as much as 11.5 billion kroner ($2 billion). Life insurance providers in Norway must boost premiums and reserves to meet an increase in life expectancy, the Financial Supervisory Authority said on March 8.

DNB ASA, Norway’s biggest lender, lost 2.4 percent to 90.3 kroner after saying the rules will hurt financial performance.

OMV Downgrade

OMV, central Europe’s biggest oil company, declined 1.9 percent to 34.43 euros in Vienna as SocGen downgraded the stock to hold from buy.

ICAP, the world’s largest broker of transactions between banks, lost 3.6 percent to 330.2 pence as UBS AG cut the shares to sell from neutral.

Sage Group Plc slipped 2.2 percent to 341.9 pence as Bank of America Corp. lowered its recommendation to underperform, the equivalent of a sell rating, from neutral and added the software maker to its least preferred technology stocks. Sage faces a reluctance from companies to adopt cloud computing and rising competition from SAP AG, Bank of America wrote.

Atlantia SpA fell 3.5 percent to 12.30 euros and Gemina SpA tumbled 6.1 percent to 1.30 euros. Italy’s largest toll-highway operator will pay one share for every nine shares of Gemina, which runs Rome’s airports, in a takeover deal that involves no cash, according to a statement released after the close of trading on March 8.

Ladbrokes Gains

Ladbrokes surged 6.5 percent to 239.8 pence, the biggest jump since April 2012, after the U.K. operator of more than 2,000 betting shops said Playtech will help develop and expand its digital business. Playtech rose 3.4 percent to 570 pence.

888 Holdings Plc gained 5.2 percent to 166.75 pence as the online gambling company announced a plan to start a division, called All American Poker Network, to introduce its brands into the U.S. market.

Nordex SE soared 15 percent to 4.43 euros, its biggest rally in two years. The German wind-turbine maker reported earnings before interest and taxes of 14 million euros ($18.2 million), compared with the 10.5 million-euro average analyst estimate in a Bloomberg survey, and raised its sales outlook.