Stocks: Monday’s review

European stocks fell to a three- month low as manufacturing contracted in the euro area and China and as Dutch Prime Minister Mark Rutte offered to resign after struggling to clinch an austerity deal.

Euro-area services and manufacturing contracted more than estimated in April, to a five-month low. A composite index based on a survey of purchasing managers in both industries fell to 47.4 from 49.1 in March, London-based Markit Economics said in an initial estimate. Chinese manufacturing also shrank for a sixth month in April, according to a survey of companies. The 49.1 preliminary reading of the purchasing managers’ index from HSBC Holdings Plc and Markit today compared with a final 48.3 the previous month.

In the Netherlands, Rutte offered his Cabinet’s resignation after one of the parties in his minority coalition withdrew support. Queen Beatrix will consider the resignation, the government’s information service said. Elsewhere, French President Nicolas Sarkozy became the first incumbent since 1958 not to win the first round of the nation’s election.

National benchmark indexes dropped in all of 18 western European markets except Iceland. The Netherlands’ AEX declined 2.6 percent to the lowest level this year. France’s CAC 40 lost 2.8 percent, the U.K.’s FTSE 100 slid 1.9 percent and Germany’s DAX retreated 3.4 percent. Sweden’s OMX tumbled 4.6 percent, the biggest drop since September.

A gauge of auto-industry companies was the second-worst performer among the 19 industry groups in the Stoxx 600, tumbling 3.7 percent. Daimler AG lost 4.2 percent to 39.50 euros, Bayerische Motoren Werke AG, which today said it expects the pace of sales growth in China to ease, fell 4.1 percent to 67 euros and Renault SA sank 5.1 percent to 33.70 euros.

Basic-resource companies also retreated. ArcelorMittal, the world’s largest steelmaker, dropped 5.3 percent to 12.25 euros. Vedanta Resources Plc declined 5.7 percent to 1,167 pence and Antofagasta Plc slid 3.2 percent to 1,140 pence.

Philips limited losses in Amsterdam, rallying 3.3 percent to 14.82 euros, after the world’s biggest light-bulb maker reported profit that beat analysts’ estimates after cutting costs and selling assets.

Cable & Wireless Worldwide Plc jumped 12 percent to 35.9 pence after Vodafone Group Plc agreed to buy the U.K. company for 1.04 billion pounds ($1.7 billion). The world’s largest wireless operator offered 38 pence a share after India’s Tata Communications Ltd. last week failed to agree on a price.

U.S. stocks joined a global selloff as political uncertainty in France and the Netherlands intensified concern about Europe’s sovereign debt crisis.

Equities from Hong Kong to Paris and Sao Paulo slumped as the Dutch prime minister ran out of room to maneuver after budget talks with Geert Wilders’s Freedom Party collapsed, triggering doubts about his country’s ability to retain its AAA credit rating. French President Sarkozy and challenger Francois Hollande will be in a second round of elections, vying to lead a country split over measures to end a debt crisis.

Economic concern grew as euro-area manufacturing fell and data indicated China’s production will contract for a sixth month.

DOW 12,927.20     -102.09        -0.78%, S&P 500    1,366.94       -11.59 -0.84%, NASDAQ 2,970.45       -30.00 -1.00%

American banks joined a 3 percent drop in a gauge of European lenders. Bank of America (ВАС) declined 2.2 percent to $8.18. The shares have risen 47 percent this year. Citigroup Inc.  decreased 1.9 percent to $33.25.

Wal-Mart (WMT) slumped 4.7 percent, the most in the Dow, to $59.54. Its probe of possible bribery in Mexico may prompt executive departures and steep U.S. government fines if it reveals senior managers knew about the payments and didn’t take strong enough action, corporate governance experts said.

Kellogg Co. tumbled 6.1 percent to $50.70. The largest U.S. maker of breakfast cereal cut its full-year earnings forecast, citing weaker-than-expected results in the first quarter.

Apple Inc., which reports results tomorrow, fell 0.2 percent to $571.70, after swinging between gains and losses. Since rising to a record on April 9, the shares have lost 10 percent as some investors speculated Apple may not be able to keep growing at the pace that made it the most valuable technology company.