Eurostoxx 50: 2,136.81 (-23.47) Frankfurt DAX: 5,537.39 (-68.61) Paris CAC: 2,870.68 (-24.26)EUROPEAN STOCKS declined yesterday, extending their biggest drop in three weeks, as borrowing costs rose in the euro area, outweighing rating companies' reaffirmation of the US's credit grades.

The benchmark Stoxx Europe 600 index slipped 0.7 per cent to 223.27 at the close as banks and technology companies retreated.

The gauge earlier advanced as much as 1 per cent after Standard and Poor’s and Moody’s reaffirmed US credit ratings.

Spain’s three-month borrowing costs more than doubled at auction yesterday, sending two-year yields towards the highest level since 2003, while Belgium’s 10-year bond yields rose to more than 5 per cent, adding to concern the euro crisis is spreading.

National benchmark indices retreated in all of the 18 markets in western Europe.

Dexia led a sell-off in banks, tumbling 8.1 per cent to 23.9 cent in Brussels. UniCredit fell 4.2 per cent to 70.05 cent in Milan, while BNP Paribas lost 4.9 per cent to €25.53 in Paris.

Commerzbank dropped 15 per cent to €1.15 after a report that Germany’s second-biggest lender may need about €5 billion in additional capital if the European Banking Authority toughens its requirements for lenders.

Danske Bank still advanced, rising 1.4 per cent to 75 kroner after Cevian Capital, a Swedish investment company, bought a 5.02 per cent stake in Denmark’s largest lender on behalf of itself and Carl Icahn.

Nokia dropped 8.8 per cent to €4.19 as Pacific Crest Securities said in a report that the Finnish phonemaker shipped fewer devices running Windows Phone 7 than predicted, while sales for the company’s Lumia product were “disappointing”.

Jefferies Group said it had turned “incrementally cautious on Nokia”, due to signs that the company’s order book had slowed coming into the fourth quarter.

Pandora gained 10 per cent to 55.05 kroner, the biggest jump on the Stoxx 600, after the Danish jewellery maker reported a third-quarter profit of 341 million kroner (€46 million), beating most analysts’ estimates.

Zodiac Aerospace rallied 4.6 per cent to €55.29 after the maker of aeronautical equipment forecast about 20 per cent growth in sales on a like-for-like basis in its first quarter. – (Bloomberg)