European stocks fall on German growth

European stocks fell for the first time in four days and the euro slid from a three-week high against the dollar after German growth almost stalled in the second quarter.

The euro weakened 0.5 per cent to $1.4374. Yields on 10-year Treasuries fell three basis points, and German 10-year yield sank five basis points.

The cost of insuring European government debt snapped three days of declines. Oil slid 1.3 per cent in New York and copper slipped 1.3 per cent.

Germany's economy, Europe's largest, expanded 0.1 per cent from the first quarter, while growth in the euro area was a less-than-forecast 0.2 per cent, reports showed today, adding to concern nations will struggle to curb budget deficits. French president Nicolas Sarkozy and German chancellor Angela Merkel are set to meet today amid investor calls for policy makers to do more to tackle the region's debt crisis.

US data may show housing starts fell, while factory production increased.

"Once again, spring 2011 marks a turning point in the business cycle, both in Germany and abroad," said Andreas Rees, chief German economist at UniCredit Group in Munich.

"Sentiment indicators across major industrialized countries and emerging markets shifted into reverse gear."

All 19 industry groups in the Stoxx 600 declined. Bayerische Motoren Werke AG and Daimler AG led losses among automakers. Terna SpA, the owner of Italy's national power network, and Snam Rete Gas SpA, which owns the nation's natural gas grid, slid more than 9 per cent as the government increased taxes on the industry.

The euro weakened against 11 of its 16 major counterparts, depreciating 0.6 per cent against the yen and 0.9 per cent versus the Swiss franc. The Markit iTraxx SovX Western Europe Index of credit-default swaps rose five basis points to 280.5.

Mr Sarkozy and Dr Merkel are meeting after debt concerns rattled France, the second-largest euro economy after Germany, last week, while calls are growing for the leaders to discuss joint borrowing or a mutual guarantee among the 17 euro states, policies that Germany and France have previously rejected.

The MSCI Emerging Europe, Middle East and Africa Index fell 2.2 per cent, its first decline in four days. Russia's Micex Index slid 3 per cent, the most since August 10th.

Spanish two-year yields rose five basis points even as the European Central Bank bought the nations' debt, according to three people with knowledge of the transactions. An ECB spokesman declined to comment.

Spain sold €5.7 billion of 371- and 546-day debt, less than the maximum target of €6 billion, with demand at both auctions falling from the previous sales. Greece sold €1.3 billion of 91-day bills today to yield 4.5 per cent.

The extra yield investors demand to hold French 10-year bonds instead of benchmark bunds rose two basis points, increasing for the first time in four days, before the government auctions as much as €7.5 billion of 49-, 84- and 189-day securities.

Bloomberg