European Stocks Drop as Investors Weigh Stimulus Outlook

European stocks dropped, paring a weekly gain, as investors weighed better-than-estimated U.S. jobs data against the probability of an easing in Federal Reserve stimulus sooner than estimated.

Total SA fell 1.2 percent, contributing the most to the benchmark gauge’s decline, after an investor sold shares in Europe’s second-largest oil producer. Finmeccanica SpA slumped 6 percent after saying it will miss its 2013 profit target. International Consolidated Airlines Group SA jumped to the highest price in almost six years after raising its outlook.

The Stoxx Europe 600 Index slid 0.2 percent to 322.72 at the close in London, after earlier losing as much as 1.2 percent. The measure climbed 0.4 percent this week, for its longest streak of weekly gains this year.

“Investors are speculating that the Fed could start tapering before the end of 2013, which is now setting the ground for heightened uncertainty and volatility,” said John Plassard, vice president at Mirabaud Securities LLP in Geneva.

A U.S. Commerce Department report yesterday showed that the world’s largest economy grew at a better-than-estimated 2.8 percent annual rate in the third quarter. Data today showed October payrolls increased more than forecast. The addition of 204,000 workers topped the median forecast in a Bloomberg survey that called for a 120,000 advance.

Timing Taper

A Bloomberg News survey last month had showed economists expected quantitative easing to continue for several months. The Fed won’t begin tapering bond buying until March and will continue its purchases until October, according to the median estimate of 40 analysts in that poll.

National benchmark indexes retreated in 10 of the 18 western European markets today. France’s CAC 40 slid 0.5 percent and Germany’s DAX was little changed. The U.K.’s FTSE 100 added 0.2 percent.

In Europe, Exane BNP Paribas SA downgraded the region’s equities to neutral from overweight. Stock valuations have become a constraint for investment, given risks to economic growth and a potential tapering of Fed stimulus, the brokerage said. The Stoxx 600 traded at 15 times the projected earnings of its constituents on Nov. 6, the highest level since early 2009.

France’s long-term foreign and local-currency credit rating was lowered one step to AA from AA+ by Standard & Poor’s, which said slower growth will restrict the government’s ability to improve public finances. The outlook for the rating is stable, the ratings company said.

Total Stake

Total fell 1.2 percent to 43.80 euros. Groupe Bruxelles Lambert SA is selling a 0.3 percent stake in the company for about 360 million euros ($483 million), according to terms of the deal.

Finmeccanica SpA slumped 6 percent to 5.11 euros, for its biggest decrease since February. The company said it won’t meet its 2013 target for earnings before interest, taxes and amortization. Profit will be 5 percent to 10 percent lower than its 1 billion-euro goal, the company said.

Rheinmetall AG tumbled 5.8 percent to 43.40 euros, for its biggest loss since July. The company said military-budget cuts by governments led to a loss at its defense division, which coupled with administrative expenses, wiped out profit from its car-components unit in the nine months ended September.

Richemont Earnings

Cie. Financiere Richemont SA retreated 0.7 percent to 92.35 Swiss francs after posting first-half operating profit that missed analysts’ estimates. The owner of the Cartier brand said operating profit dropped to 1.37 billion euros in the six months through September. Analysts in a Bloomberg survey forecast 1.4 billion euros.

Telecom Italia SpA retreated 5.6 percent to 68 euro cents after unveiling plans to sell its Argentine business and assets including wireless towers in Italy and Brazil. The phone company also completed a sale of mandatory convertible bonds.

IAG gained 8 percent to 376.9 pence after saying third-quarter earnings more than doubled and raising its full-year outlook. The parent of British Airways posted operating profit of 690 million euros before one-time items, beating the 651 million-euro average estimate of four analysts.

Rolls-Royce Holdings Plc rose 3.4 percent to 1,210 pence. The world’s second-largest maker of commercial jet engines raised the earnings target for its defense aerospace unit after booking more contracts from the U.S. government.

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