European stocks fluctuated after better-than-forecast data on U.S. company hiring and service- industry growth offset concern that China’s banking regulators are bracing for home-price declines of as much as 60 percent. Electricite de France SA, Europe’s biggest power generator, rallied 5.6 percent after the French government agreed an increase in electricity prices. Lundin Petroleum AB surged the most in four months as Sweden’s largest oil explorer increased its production guidance. Allied Irish Banks Plc, the country’s second-biggest bank, sank 5.7 percent after reporting a wider first-half loss. The Stoxx Europe 600 Index slipped 0.1 percent to 261.78 at 4:02 p.m. in London, having swung between gains and losses at least six times. The gauge has fallen 3.9 percent from its high this year on April 15 amid speculation that the world economy may tip back into recession. Today’s U.S. jobs data from ADP Employer Services may spur optimism that a government report due Aug. 6 will show a smaller-than-forecast drop in July payrolls. “The labour market is now the critical variable in the U.S. economic debate,” Ian Richards, an equity strategist at Royal Bank of Scotland Group Plc wrote in a note to clients today. “Over time this series correlates very well with the official non-farm payrolls data,” he wrote, referring to the ADP report. Chinese Banks European stocks pared gains after a person with knowledge of the matter said China’s banking regulator told lenders last month to conduct a new round of stress tests to gauge the impact of residential property prices falling as much as 60 percent in the hardest-hit markets. Previous stress tests carried out in the past year assumed home-price declines of as much as 30 percent. The tougher assumption may underscore concern that last year’s record $1.4 trillion of new loans fueled a property bubble that could lead to a surge in delinquent debts. “On one hand, it’s scary that Chinese officials think a 60 percent price decline is a possibility that needs to be taken seriously but on the other, they are not messing around and are planning for the worst.” said Peter Boockvar, an equity strategist at Miller Tabak & Co. in New York. “While a 50 percent to 60 percent drop is certainly alarming, it matches the declines seen in the hardest-hit U.S. markets.” U.S. Economy Companies in the U.S. added 42,000 workers to payrolls in July, according to ADP. Economists surveyed by Bloomberg News had forecast a gain of 30,000, according to the median estimate. Stocks rose to the highest levels of the day after a report showed U.S. service industries expanded in July at a faster- than-estimated pace. The Institute for Supply Management’s index of non-manufacturing businesses, which covers about 90 percent of the economy, rose to 54.3 from 53.8 in June. Readings above 50 signal expansion. EDF jumped 5.6 percent to 35.18 euros after the French government said yesterday that electricity prices will rise 3.4 percent effective Aug. 15. Lundin Petroleum rallied 5.9 percent to 44.25 kronor as the oil explorer increased its guidance range for production this year to 31,000 to 34,000 barrels of oil equivalent a day from 29,000 to 33,000 barrels. Second-quarter net income rose to $368.4 million from $6.5 million a year earlier. Analysts had forecast a profit of $347 million, according to the average of five estimates surveyed by Bloomberg. Lloyds Gains Lloyds Banking Group Plc climbed 4.3 percent to 75.04 pence. Britain’s largest mortgage lender reported a profit for the first time since its acquisition of HBOS Plc 19 months ago, as bad loan charges plunged. Pro-forma pretax profit was 1.6 billion pounds ($2.54 billion) in the first six months of the year, beating the 694.5 million-pound estimate of 17 analysts in a Bloomberg survey. About 54 percent of the 205 companies in the Stoxx 600 to have reported results since July 12 have beaten forecasts for net income, according to data compiled by Bloomberg. That compares with 77 percent of S&P 500 companies during the same period, the data show. Allied Irish plunged 5.7 percent to 93.2 euro cents after its first-half loss widened as bad debts rose. Bank of Ireland Plc slid 3.5 percent to 83.5 euro cents. Next Plc plummeted 8.1 percent to 2,021 pence. The U.K.’s second-biggest clothing retailer forecast “more restrained” consumer spending in the second half as a revenue decline accelerated. Marks & Spencer Group Plc, the U.K.’s largest clothing retailer, lost 3.1 percent to 349.6 pence and Home Retail Group Plc fell 4.2 percent to 234.3 pence. Petroplus, Cookson Petroplus Holdings AG, Europe’s biggest independent refiner, retreated 7.9 percent to 15.59 Swiss francs. The company reported a net loss in the second quarter because it idled three refineries at a time of rising margins from processing crude oil into fuels. Cookson Group Plc slumped 6.3 percent to 452.3 pence after reporting first-half trading profit of 120 million pounds. “The relative trading profit result was disappointing,” Oliver Wynne-James, an analyst at Panmure Gordon & Co. wrote in a report today. “Due to working capital there was no free cash flow in the period and net debt was higher than expected. He retained his “buy” recommendation on the shares, saying “these results will not help to closer the considerable valuation gap.” Standard Chartered Plc, the U.K. bank that gets more than three quarters of its earnings from Asia, dropped 5.6 percent to 1,796 pence as income from its consumer bank missed some analyst estimates. Royal Bank of Scotland Group Plc cut its recommendation on the shares to “hold” from “buy,” citing weakness in capital- market related sales and pre-impairment profit that missed forecasts. To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net

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