European stocks fell, led by mining shares after Rio Tinto Group damped speculation of takeovers in the industry and copper declined for a third day.

“We’re getting into a stage where there’s a lot of noise” about potential bids, said Sailesh Bhundia, who helps manage $2.4 billion at EFG Asset Management in London. Investors have to sort out “which takeover rumors make sense.”

Rio Tinto dropped from a record high, leading the Dow Jones Basic Resources Index to its biggest slide in more than three weeks. E.ON AG and RWE AG paced a retreat by utilities on concern central banks will keep raising interest rates.

A wave of takeovers has helped lift the Stoxx 600 6.6 percent this year. Deals in the region have totaled $1.06 trillion in 2007, according to data compiled by Bloomberg. They reached a record $1.6 trillion last year.

The Stoxx 600 lost 0.4 percent to 389.21 at 12:03 p.m. in London. The Stoxx 50 slid 0.5 percent and the Euro Stoxx 50, a measure for the 13 nations sharing the euro, decreased 0.3 percent.

European Central Bank President Jean-Claude Trichet will probably signal today that borrowing costs will rise next month, after keeping rates unchanged at a 5 1/2-year high. The Bank of England lifted its benchmark rate a quarter-point to a six-year high today.

“Investors are taking some profits on concern the ECB might indicate further rate increases,” Karsten Stroh, who manages $15 billion as head of equities at JPMorgan Asset Management in Frankfurt.

National Markets

National benchmarks decreased in 15 of the 18 western European markets. Germany’s DAX and the U.K.’s FTSE-100 both fell 0.2 percent. France’s CAC 40 was little changed.

Rio Tinto, the world’s third-largest mining company, lost 2.6 percent to 3,564 pence. BHP Billiton, the world’s biggest mining company, declined 3 percent to 1,212 pence.

Shares of Rio Tinto surged to an all-time high yesterday on speculation the company may receive a bid from BHP. Nick Cobban, a spokesman for Rio, said yesterday the company hasn’t received an approach from Melbourne-based BHP or other parties. Ian Head, Melbourne-based spokesman for Rio, said today the company had nothing to add to the statement released to the exchange yesterday.

Copper Declines

Copper fell in London after a technical gauge used by traders showed gains that sent the metal price to an 11-month high last week were overdone. Copper for delivery in three months lost $80, or percent, to $7,970 a ton. The metal has lost 4.4 percent from $8,335 on May 4, the highest since May 2006.

Mining stocks had the worst performance among the 18 industry groups in the Stoxx 600, dropping 1.9 percent.

E.ON dropped 1.5 percent to 110.80 euros. RWE declined 1.9 percent to 77.84 euros. Higher rate changes increase boost borrowing costs and also decrease the attractiveness of dividend yields for utility companies, among the highest in the region.

“Investors don’t like rising interest rates,” said Petra von Kerssenbrock, an analyst at Commerzbank AG in Frankfurt. “In the long term, there’s certainly a risk for the markets here.”

Hypo Real Estate Holding AG rose 5.8 percent to 52.25 euros, the most in 10 months. Germany’s second-biggest commercial- property lender said adjusted first-quarter net income, excluding the effect of capitalized losses carried forward, rose 25 percent to 130 million euros. That beat the 123 million-euro median estimate of 12 analysts surveyed by Bloomberg.

Beating Estimates

Of the 31 Stoxx 50 companies that have reported their latest first-quarter earnings, 22 beat forecasts, based on data compiled by Bloomberg. Corporate profits in Europe may rise about 6.4 percent in 2007, according to FactSet Research Systems Inc. in London.

“Corporate earnings were mostly better than expected,” said Stephan Thomas, who oversees about 2.5 billion euros ($3.4 billion) at Frankfurt Trust Investment GmbH in Frankfurt. “There won’t be any disruptions from this side. There’s room for further profit growth which will be reflected in share prices.

Bayerische Motoren Werke AG climbed 3 percent to 48.84 euros after Goldman, Sachs & Co. added the shares of the world’s biggest luxury carmaker to its “conviction buy” list and lifted its price estimate 21 percent to 58 euros apiece.

“BMW is likely to determine a target profitability level for 2010 to form a basis for longer-term strategic decisions on growth, capacity, and natural hedging and optimal balance sheet structure,” analysts including Stefan Burgstaller wrote in a report to investors today.

Bid Speculation

Hammerson Plc shares surged 7 percent to 1,678 pence, the biggest gains in the Stoxx 600, after The Business magazine reported New York-based buyout firm Kohlberg Kravis Roberts & Co. and Vornado Realty Trust may bid for the U.K. owner of malls and offices. The Business cited unidentified people as saying KKR and Vornado, the No. 2 real estate investment trust in the U.S., were mulling bids.

“We never comment on market rumors,” said Chris Smith, spokesman for Hammerson, the U.K.’s third-biggest REIT.

“Merger mania will remain the driver for further share price gains,” said Norbert Faller, who manages 1 billion euros for Union Investment in Frankfurt. “I expect more billion-euro deals. This will continue to boost equities.”

Zurich Financial Services AG rose 2.2 percent to 372.5 Swiss francs on speculation Warren Buffett’s Berkshire Hathaway Inc. may bid for Switzerland’s largest insurer.

“Warren Buffett has said that he will make a very large acquisition and that he has a special affinity for insurance,” said Rene Locher, an analyst at Bank Sal. Oppenheim in Zurich. “Zurich would fit that exactly. It’s a fantastic company.”

Buffett said May 6 that he would “love” to find a $40 billion acquisition and would “figure out a way” to come up with $60 billion for the right deal.

“I never comment, but don’t hold your breath,” Buffett said last night in New York, when asked whether he is interested in Zurich Financial. Zurich Financial spokesman Angel Serna declined to comment.

To contact the reporter on this story: Andreas Hippin in Frankfurt at ahippin@bloomberg.net .

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