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European stocks fell to a two-month low as industrial production dropped the most in at least three years.

Euro-area industrial production dropped the most in more than three years in September, led by double-digit declines in Portugal and Ireland. Output fell 2.5 percent from August, when it increased 0.9 percent, the European Union’s statistics office in Luxembourg said today. The median economist estimate was for a drop of 2 percent.

In the U.K., jobless claims rose at the fastest pace in more than a year, increasing by 10,100 to 1.58 million in October. The median economist estimate was for no change.

Europe’s budget enforcers proposed easing the pressure on Spain to cut the deficit, backing further away from the austerity-first mantra that has dominated the response to the sovereign-debt crisis.

The European Commission said Spain doesn’t need to compound the budget-cutting pain in 2012 or 2013 and indicated the country would be eligible for a credit line to shore up its public balance sheet.

National benchmark indexes declined in 14 of the 18 western-European markets today. France’s CAC 40 slipped 0.9 percent, Germany’s DAX lost 0.9 percent, while the U.K.’s FTSE 100 fell 1.1 percent.

ICAP tumbled 9.2 percent to 281.4 pence after the company reported a 26 percent decline in fiscal first-half pretax profit to 137 million pounds ($217 million) as the sovereign-debt crisis hurt trading. The company also said full-year profit would be at the “low end” of the 300 million-pound to 332 million-pound range forecast by analysts.

Monti Paschi fell 5.1 percent to 20.1 euro cents after Italy’s third-biggest bank unexpectedly reported a third-quarter loss of 47.4 million euros as provisions for bad loans almost doubled. The average analyst estimate was for net income of 103.4 million euros.

Vivendi SA jumped 4.7 percent to 15.69 euros after the company said earnings will fall less than expected this year, helped by cost cuts and demand for video games. The owner of record company Universal Music Group also reported that adjusted third-quarter profit declined 2.9 percent to 665 million euros, beating the average analyst estimate of 598 million euros.

Infineon Technologies AG climbed 5.9 percent to 5.55 euros after Europe’s second-biggest semiconductor maker said it plans to reduce spending next year after fourth-quarter sales and operating profit topped analysts’ estimates.