European Stocks Drop Most Since August as Orange Falls

European stocks fell the most in more than three months as investors weighed valuations before U.S. jobs data this week that may help gauge when the Federal Reserve will pare its stimulus.

ThyssenKrupp AG slid to a 10-week low after raising 882.3 million euros ($1.2 billion) through a share sale. Antofagasta Plc led a measure of mining companies lower. Orange SA slipped 3.4 percent amid concern a price war in the French mobile market will extend to fourth-generation data services. Sonova Holding AG declined 1.8 percent as Morgan Stanley cut its rating on the Swiss hearing-aid maker.

The Stoxx Europe 600 Index fell 1.5 percent to 319.13 at the close of trading, its biggest loss since Aug. 27. The gauge has rallied 14 percent this year, even as analysts cut their earnings estimate for its constituents to 21.37 euros per share from 24.13 euros at the beginning of 2013. That pushed its valuation to 14.9 times projected earnings, below the 15.72 mark reached in October 2009, which was its highest level since at least March 2005, data compiled by Bloomberg showed.

“There’s been a frenzy for European equities in the last three months and we’re now waiting for a short-term consolidation,” said Francois Savary, who oversees about $9.4 billion as chief investment officer at Reyl & Cie. in Geneva. “A lot still depends on a few uncertainties in the U.S., such as fiscal and monetary policy, that have the potential to disappoint investors. Market psychology has been too optimistic for Europe and expectations for 2014 growth may be too high.”

American Jobs

On Friday, investors will get the latest reading on U.S. non-farm payrolls for November, and data may show the unemployment rate fell to 7.2 percent, matching the lowest level in five years. A jobs report tomorrow may show U.S. companies added the most workers since June. The central bank will release its Beige Book on economic conditions tomorrow.

The Fed has said it will monitor labor-market gains before deciding when to pare its $85 billion of monthly bond purchases. Policy makers will probably wait until their March 18-19 meeting, when they will reduce monthly bond purchases to $70 billion, according to the median estimate in Bloomberg’s survey on Nov. 8. They next meet on Dec. 17-18.

The European Central Bank and the Bank of England will both announce policy decisions on Thursday.

The Portuguese government raised 578 million euros by selling 70 percent of its postal service CTT-Correios de Portugal SA at 5.52 euros apiece, the top of the price range it indicated. This was the first initial public offering in the euro area’s third-most indebted country since June 2008.

National Markets

National benchmark indexes fell in all 18 western European markets. The U.K.’s FTSE 100 lost 1 percent, while Germany’s DAX slid 1.9 percent.

France’s CAC 40 dropped 2.7 percent, for its biggest drop since June. Credit Suisse Group AG cut its rating on French stocks to underweight from benchmark, meaning investors should holds less of the index than represented in reference gauges.

ThyssenKrupp fell 2.2 percent to 17.26 euros. The German steelmaker sold 51.4 million new shares at 17.15 euros apiece. The company yesterday plunged the most since August 2011 after saying it would boost capital by 10 percent of its market value.

Antofagasta tumbled 3.4 percent to 754 pence, its lowest price since October 2009. Polymetal International Plc dropped 2.4 percent to 498 pence, its lowest price since July 10. BHP Billiton Ltd., the world’s largest mining company, slid 1.1 percent to 1,801.5 pence. A gauge of commodity producers on the Stoxx 600 fell 1.3 percent.

Price War

Orange declined 3.4 percent to 9.20 euros. Iliad SA’s Free Mobile subsidiary said it will offer customers 4G Internet as part of its monthly plans at no extra cost, according to a statement. Bouygues SA retreated 4 percent to 26.61 euros.

Sonova lost 1.8 percent to 123.10 Swiss francs. Morgan Stanley downgraded the stock to equal weight, similar to a neutral recommendation, from overweight. New product releases from competitors such as GN Store Nord A/S and William Demant Holding A/S may hurt revenue growth, Morgan Stanley said.

Sanofi fell 3.1 percent to 74.81 euros, for its biggest decrease in four months. Tests showed Sanofi’s U300 treatment wasn’t more effective than the company’s best-selling Lantus diabetes drug in a test of patients not already taking insulin, Sanofi said.

The number of shares changing hands today in Stoxx 600-listed stocks was 17 percent greater than the average of the past 30-days, data compiled by Bloomberg showed.