European stocks fell from a one- month high after a missile test by North Korea raised security concerns and triggered a worldwide slide in markets. BHP Billiton and Total SA led a drop by commodity producers.

``Investors are taking some profits after a week of strong returns,'' said Vafa Ahmadi, a fund manager at CPR Asset Management in Paris, who helps oversee the equivalent of $22.7 billion. ``The North Korea missile test issue is not reassuring the market.''

Alliance & Leicester Plc dropped after Credit Agricole SA, said it wouldn't make an offer for the U.K. lender. Endesa SA and Iberdrola SA fell after Credit Suisse downgraded its recommendation on the power producers' shares.

The Dow Jones Stoxx 600 Index fell 1.2 percent to 318.98 in London, as all 18 industry groups slid. The Stoxx 50 lost 1.1 percent while the Euro Stoxx 50, a measure for the countries using the euro, dropped 1.4 percent.

The Stoxx 600 last week posted its best weekly performance since January as concerns eased that higher borrowing costs will cut into earnings. U.S. reports today on factory orders and jobs reignited speculation interest rates may have to keep rising to control inflation.

The Morgan Stanley Capital International World Index slid 1.3 percent after North Korea launched at least seven missiles over the Sea of Japan. The missiles, which U.S. military officials say may reach as far as Alaska, failed less than a minute after takeoff.

`Short-Term Reaction'

``European markets are seeing a short-term reaction to the North Korean missiles,'' said Jamie Coleman, a fund manager at EFG Wealth Management in London, where he helps to oversee $550 million. ``While this is a potentially massive issue, it is unlikely to stick. Investors are still focused on when and if there will be another U.S. interest rate hike.''

U.S. manufacturers received more orders for business equipment in May while ADP Employer Services, a unit of Automated Data Processing Inc., the world's biggest paycheck processor, said U.S. companies added 368,000 jobs in June, the most since at least 2001.

The U.S. Federal Reserve has lifted borrowing costs for the 17th consecutive meeting.

National benchmarks slid in all 18 western European markets. Germany's DAX lost 1.8 percent, France's CAC fell 1.3 percent while the U.K.'s FTSE 100 retreated 1 percent.

BHP led mining companies lower even as metal prices gained in London. The world's largest mining company lost 3.1 percent to 1,026 pence. Boliden AB, Europe's third-largest copper refiner, fell 5.3 percent to 125.5 kronor.

Total paced declines among energy producers. Europe's third-largest oil company lost 1.5 percent to 51.05 euros. Royal Dutch Shell Plc, the region's No. 2, slipped 0.5 percent to 1,828 pence.

`Markets Correcting'

``Markets are correcting because of tension caused by the North Korea news,'' said Sergi Martin who oversees $5 billion at Credit Andorra. ``Commodity stocks are taking the brunt.''

Alliance & Leicester dropped 5.7 percent to 1,084 pence after Credit Agricole declined to bid for the lender. Agricole said May 22 it was weighing an offer for Alliance, the seventh-biggest U.K. bank.

Endesa, Spain's largest energy company, fell 1.3 percent to 24.84 euros after Credit Suisse cut its recommendation to ``neutral'' from ``outperform'' and reduced the share-price estimate to 27.5 euros from 29.5 euros.

The brokerage cited decisions by Gas Natural SDG SA and E.ON AG, which are competing for control of Endesa, to lower their offers for the company.

M&A Increases

Scor SA added 2.3 percent to 1.8 euros after the largest French reinsurer agreed to buy Revios Ruckversicherung AG from Globale Rueckversicherungs AG for 605 million euros ($776 million) to create the world's fourth-biggest life reinsurer.

Banca Fideuram SpA, the asset management unit of Sanpaolo IMI SpA, surged after Italy's third-biggest bank offered 1.3 billion euros ($1.7 billion) for the rest of the business. The shares rallied 8.9 percent to 4.95 euros.

``There are quite a lot more mergers and acquisitions to come,'' said Roger Nightingale, a global strategist at Millennium Global Investments in London, which oversees $4.3 billion. ``There is still quite of lot of cash in the system and it has to be absorbed.''

A record $889 billion of mergers and acquisitions have been announced in Europe this year compared with $488 billion in the same period in 2005, according to Bloomberg data.

Santander Central Hispano SA, Spain's biggest bank, may consider increasing its 8.4 percent stake in Sanpaolo to gain more say in running the Italian lender, said Chief Financial Officer Jose Antonio Alvarez. Sanpaolo shares added 0.7 percent to 13.99 euros.

Asking More

Cattolica Assicurazioni SpA climbed 4.9 percent to 43.62 euros. The company is asking Banco Popolare di Verona e Novara Scrl to pay 60 euros a share to purchase it, the Italian newspaper Finanza & Mercati reported without saying where it obtained the information. Banco Popolare di Verona said the newspaper report is ``untruthful.''

Store Nord A/S, the world's largest maker of mobile headsets, surged 14 percent to 78 kroner, the best performer on the Stoxx 600. The company said it may sell its hearing aid unit because of rising costs.

D1 Oils Plc, a U.K. producer of biofuel, jumped 10 percent to 304.5 pence after the company said it has held talks with potential buyers.

Power Prices

Electricite de France SA, the world's largest power company by market value, fell 2 percent to 41.03 euros. French lawmakers want the finance ministry to let companies revert to regulated gas and power prices, La Tribune reported, citing Patrick Ollier, the head of the National Assembly's economic affairs committee.

Companies choosing to revert to below-market prices of electricity would pay a penalty, as in Spain, Ollier said, according to the newspaper. Ollier also said that such an option could have ``heavy'' consequences for the share price of EDF, the paper reported.

Shares of European Aeronautic, Defence & Space Co., the parent company of Airbus SAS, dropped 4.1 percent to 20.53 euros. BAE Systems Plc, Europe's biggest defense contractor, said it will audit Airbus after an investment bank valued its 20 percent stake in the planemaker at 2.75 billion euros ($3.5 billion), less than the book value.

Sodexho Alliance SA, the world's second-largest caterer, climbed 0.9 percent to 37.98 euros after the company raised its forecast for fiscal 2006 sales growth to more than 5.5 percent after new contracts lifted nine-month revenue.

Boost Profit

Oce NV, the world's largest maker of wide-format printers, rallied 4.9 percent to 12.11 euros. The company posted an 8.2 percent rise in fiscal second-quarter profit, boosted by the acquisition of Imagistics International Inc.

Banca Italease SpA, which offers its clients lease financing and insurance, declined 12.4 percent to 34.68 euros, the biggest decliner on the Stoxx 600, on concern a new tax regime for property sales and lease contracts in Italy may hurt earnings, according to analysts at Banca Akros.

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To contact the reporter on this story:
Sarah Jones in London at  sjones35@bloomberg.net;

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