European stocks dropped

European stocks dropped the most in a month after Home Depot Inc. of the U.S. cut its profit forecast, copper prices retreated and the dollar fell to a record low against the euro.

Wolseley Plc, a distributor of plumbing equipment that generates more than half of its sales in the U.S., and homebuilder Taylor Wimpey Plc led the decline. Siemens AG, Europe's biggest engineering company, and Volkswagen AG, the region's largest carmaker, also fell. Anglo American Plc led the Dow Jones Stoxx Basic Resource Index to its steepest retreat since March.

``We maintain that the overhang in the U.S. housing market will keep pressure on spending throughout the second half of 2007, and the profit warning from Home Depot just confirms this,'' said Jane Coffey, head of equities at Royal London Asset Management, which oversees about $14 billion.

Foodmakers limited today's drop. Groupe Danone SA yesterday offered to buy Royal Numico NV for 12.3 billion euros ($16.8 billion), reigniting takeover speculation in the industry. Unilever SA, the world's second-biggest producer of food and detergent, and Nestle SA paced the advance.

Europe's Stoxx 600 index lost 1.2 percent to 393.71 as of 3:44 p.m. in London. The decline was the most since June 6. The Stoxx 50 fell 1.3 percent and the Euro Stoxx 50, a measure for the euro region, slid 1.2 percent.

National benchmarks slid in all of the 18 western European markets. The U.K.'s FTSE 100 declined 1.1 percent. Germany's DAX sank 1.5 percent and France's CAC 40 lost 1.4 percent.

Home Depot cut its forecast for annual profit because of the sale of the HD Supply unit and the slump in the U.S. housing market. Earnings per share will drop between 15 percent and 18 percent in the current fiscal year. Home Depot had previously forecast a 9 percent decline.

`Scared' About Future

``If Home Depot says things aren't good, that's negative,'' said Jerome Forneris, who helps manage $8.1 billion at Banque Martin Maurel in Marseille. ``It means people don't have money or are scared about the future.''

Federal Reserve Chairman Ben Bernanke today will discuss inflation during an appearance at a National Bureau of Economic Research event in Cambridge, Massachusetts. His speech is scheduled to begin at 1 p.m. New York time.

Wolseley, the world's biggest distributor of plumbing and heating equipment, sank 2.6 percent to 1149 pence. Wolseley makes 59 percent of its revenue in the U.S. Taylor Wimpey, which generates a third of sales in North America, slid 2.9 percent to 333 pence.

Siemens, Anglo American

Siemens lost 2.3 percent to 108.65 euros. The company makes 20 percent of its sales in the U.S. Volkswagen fell 1.7 percent to 121.99 euros. The carmaker makes 14 percent of its sales in North America.

The dollar dropped against the euro before Bernanke's speech. The U.S. currency broke the April 27 record of $1.3681 and traded at as much as $1.3717 per euro, the most since the common currency was introduced in 1999. A weaker dollar erodes the value of European companies' sales in the U.S.

Anglo American, the world's second-biggest mining company, dropped 3.6 percent to 3203 pence. BHP Billiton Ltd., the world's largest, fell 3.7 percent to 1486 pence. Rio Tinto Group, the No. 3, tumbled 3.1 percent to 3897 pence.

The basic resource index slid 3.1 percent, its biggest drop since March 14.

Copper fell 0.4 percent in New York and slid from a two- month high in London. Nickel declined in London to the lowest in almost six months as rising stockpiles of the metal indicated a slowdown in demand growth.

Numico, Unilever

Numico jumped 21 percent to 53.75 euros, while Danone, the world's biggest yogurt maker, slipped 2 percent to 58.28 euros.

Danone Chief Executive Officer Franck Riboud said yesterday the world's largest yogurt maker will pay 55 euros for each share of Numico. The offer is 38 percent more than Numico's closing price last week.

Unilever, the world's second-largest maker of food and detergent, jumped 2.3 percent to 23.56 euros. Nestle, the biggest food producer, added 1 percent to 477 francs.

``We have seen a lot of corporate activity in the sector over the past few weeks,'' said Julian Hardwick, a London-based analyst at ABN Amro Holding NV. ``The Unilever share-price move is a reflection of this.''

Unilever also gained on speculation managers from Numico will join the company. Jan Bennink, Numico's chief executive officer, said he and Chief Financial Officer Jean-Marc Huet will leave after Danone's purchase. Unilever is seeking a successor to Rudy Markham, who said in February he would step down as CFO.

Numico's Team

``It's a once-in-a-lifetime opportunity for Unilever to get Numico's team aboard,'' said Marco Gulpers, an analyst at ING Wholesale Markets in Amsterdam.

Tanno Massar, a spokesman at Unilever, declined to comment.

Marks & Spencer Group Plc advanced 1.3 percent to 641 pence. The company said first-quarter sales in the U.K. rose 6.4 percent. Analysts had predicted a 5.5 percent increase in sales.

Air Liquide SA, the world's second-biggest maker of industrial gases, jumped 1.1 percent to 97.23 euros on speculation about a possible bid from buyout firm Kohlberg Kravis Roberts & Co.

``Rumors abound that KKR is considering a bid for this unique French operation,'' said David Buik, an analyst at BCG Partners in London.

Simon Moyse, a London-based spokesman for KKR, which has its headquarters in New York, didn't immediately return a call to his mobile phone seeking comment.

Arriva Plc surged 8 percent to 770.5 pence. The biggest operator of buses in London won a contract to operate the U.K. cross-country rail franchise valued at more than 1 billion pounds ($2.1 billion).

Johnson Service Group Plc sank 5.8 percent to 308 pence. Shares of the U.K.'s biggest dry cleaner dropped the most in more than seven months after the company said demand for its cleaning services declined in the first half, a linen-hire unit lost money and earnings at a work-wear rental division missed estimates.