European stocks close:

European stocks dropped, erasing earlier gains, as a surge in French borrowing costs added to concern the region’s debt crisis is spreading.

Stocks tumbled yesterday after Italian borrowing costs surged to euro-era records. Italy’s 10-year bond yield yesterday closed at 7.25 percent, near levels that prompted Greece, Ireland and Portugal to seek bailouts.

French 10-year bonds extended their declines today, sending the yield 20 basis points higher to 3.40 percent. Sean Egan, president and founding principal of Egan-Jones Ratings Co., told Bloomberg Radio the nation’s sovereign-debt rating is “probably headed south.”

The difference in yield with similar-maturity benchmark German bunds increased 18 basis points to 166 basis points, the most since the euro was introduced in 1999.

National benchmark indexes declined in 15 of the 18 western European markets today. France’s CAC 40 and the U.K.’s FTSE 100 both slid 0.3 percent, while Germany’s DAX rose 0.7 percent.

Credit Agricole SA slid 2.3 percent after France’s third- largest bank reported a drop in profit. The bank reported a 65 percent drop in third-quarter profit to 258 million euros as writedowns on Greek debt crimped earnings.

Vedanta Resources Plc led a retreat in mining companies, falling 9.5 percent after the largest copper producer in India reported a 92 percent drop in first-half profit to $27.8 million on foreign-exchange losses. The shares also fell as copper tumbled in London.

Air France-KLM lost 5 percent to 4.62 euros after Europe’s biggest airline reported a 31 percent drop in quarterly profit and said it expects to post a full-year loss as fuel costs surge and a sluggish economy weighs on ticket prices.