European Stocks Sink as Bernanke Outlines Stimulus Paring

European stocks sank after Federal Reserve Chairman Ben S. Bernanke said the bank may end bond purchases next year if the economy strengthens in line with forecasts. U.S. index futures and Asian shares slid.

Rio Tinto Group led mining companies lower as a gauge of Chinese manufacturing fell. Swatch Group AG fell to the lowest in almost two months after Swiss watch exports dropped. Eurotunnel Group SA tumbled 5.3 percent after Les Echos reported the European Commission will demand a reduction in tolls to use the Channel Tunnel.

The Stoxx Europe 600 Index (SXXP) fell 1.7 percent to 287.33 at 9:44 a.m. in London, the biggest decline in a week. All 19 industry groups retreated and 25 shares slipped for each one that advanced. The measure has lost 7.5 percent since May 22, when Bernanke indicated the U.S. central bank could pare stimulus measures as the economy heals.

"The extreme levels of support provided by central banks to risk assets may be nearing a turning point," Dennis Jose, an equity strategist at Barclays Plc in London, wrote in a report today. "Our economists now expect the Fed to start tapering asset purchases in September 2013. We advise caution near term, though the current high equity risk premium should cushion against an excessive decline in sentiment."

Standard & Poor's 500 Index futures lost 0.6 percent after the U.S. gauge dropped the most in two weeks yesterday. The MSCI Asia Pacific Index (MXAP) plunged 4.2 percent, on course for the largest decline since March 2011.

Volume, Volatility

The number of shares changing hands in Stoxx 600 companies today was 27 percent greater than the 30-day average, according to data compiled by Bloomberg. The VStoxx Index (V2X), which measures the cost of options hedging against moves in the Euro Stoxx 50 Index, climbed 6.8 percent.

The Fed will probably taper its stimulus measures later in 2013 and halt bond purchases around mid-2014 as long as the world's largest economy performs in lin! e with Fed projections, Bernanke told reporters yesterday in Washington after a two-day meeting of the Federal Open Market Committee.

The central bank said it will keep buying bonds at a pace of $85 billion a month, and repeated that it's prepared to increase or reduce the pace of purchases depending on the outlook for the job market and inflation.

U.S. reports today may show home sales climbed and jobless-benefit claims were little changed. Purchases of previously owned houses probably climbed 0.6 percent in May to a 5 million annualized rate, according to the median forecast of economists surveyed by Bloomberg ahead of data from the National Association of Realtors. Jobless claims rose to 340,000 last week from 334,000 the period before, economists said.

Rio Tinto

A gauge of basic-resources shares was the worst performer on the Stoxx 600. Rio Tinto and BHP Billiton Ltd. (BLT), the world's largest mining companies, lost 4.5 percent to 2,675 pence and 3.8 percent to 1,744 pence, respectively.

The preliminary reading of a Chinese purchasing managers' index for June released today by HSBC Holdings Plc and Markit Economics was 48.3, missing economists' estimates of 49.1. A number below 50 indicates contraction.

Randgold Resources Ltd. tumbled 5.9 percent to 4,372 pence as gold slid to the lowest since January 2011. Polymetal International Plc, a Russian gold and silver producer, slid 4.5 percent to 587 pence.

Swatch Slips

Swatch and Cie. Financiere Richemont SA fell 3.7 percent to 514.50 Swiss francs and 3.3 percent to 82.30 francs, respectively. Swiss watch exports fell 3.9 percent in May from a year earlier, the Federation of the Swiss Watch Industry said.

Eurotunnel, operator of the Channel Tunnel between Britain and France, lost 5.3 percent to 5.93 euros. Les Echos reported the European Commission will demand toll reductions as freight and passenger rates are seen as excessive.

Aberdeen Asset Management Plc (ADN), Scotland's la! rgest mon! ey manager, lost 4.4 percent to 382.4 pence as Goldman Sachs Group Inc. downgraded the stock to neutral from buy.

Nokia Oyj, the Finnish mobile-phone maker, advanced 3.2 percent to 2.95 euros as the Wall Street Journal reported that Microsoft Corp. discussed acquiring the Finnish phone maker's device business.