European stocks close

European stocks declined the most in a month, trimming the best quarter in four years, as the U.S. faced the first government shutdown in 17 years and Italian Prime Minister Enrico Letta fought to save his administration.

The U.S. government is heading for its first partial shutdown since 1996 at midnight tonight, after a weekend with no signs of negotiations or compromise from either the House of Representatives or Senate to avert it.

The House voted 231-192 yesterday to tie an extension of government funding through Dec. 15 to a delay in many central provisions of President Barack Obama’s health-care changes. The Senate convened in Washington today and will probably reject the deferral to Obamacare.

A federal shutdown would reduce fourth-quarter economic growth by as much as 1.4 percentage points, depending on its length, economists said, as government workers from park rangers to telephone receptionists are laid off temporarily. The Office of Management and Budget estimated 30 days of shutdowns in 1995 and 1996 cost more than $1.4 billion, or $2.09 billion in today’s dollars.

In Italy, Letta said he’ll request a confidence vote for Oct. 2 to try to save his five-month-old administration after Silvio Berlusconi withdrew his support from the ruling coalition and pulled his ministers from cabinet. Yields on the nation’s 10-year bonds rose two basis points to 4.43 percent.

National benchmark indexes retreated in all 18 western European markets. The U.K.’s FTSE 100 and Germany’s DAX each lost 0.8 percent, while France’s CAC 40 Index slid 1 percent.

UniCredit, Italy’s largest bank, lost 1.3 percent to 4.71 euros. Intesa Sanpaolo, which appointed Carlo Messina as chief executive officer to replace Enrico Tommaso Cucchiani yesterday, fell 3.5 percent to 1.53 euros. Mediaset SpA, the broadcaster controlled by Berlusconi, dropped 4.5 percent to 3 euros, the lowest price since July 3.

A gauge of basic-resources shares fell 0.9 percent. Rio Tinto and BHP Billiton Ltd., the world’s biggest mining companies, retreated 1.4 percent to 3,023 pence and 1.1 percent to 1,820 pence, respectively. Anglo American Plc lost 1.4 percent to 1,518 pence.

A Chinese manufacturing gauge rose to 50.2 for September from 50.1 in August, according to a purchasing managers’ index from HSBC Holdings Plc and Markit Economics. The reading missed the preliminary estimate of 51.2. Fifty is the threshold between contraction and expansion.

Telecom Italia SpA rose 5.2 percent to 61 euro cents amid speculation Chief Executive Officer Franco Bernabe will resign. Bernabe plans to tell the board at a meeting scheduled for Oct. 3 that he’s ready to step down after losing the backing of Telco SpA, the Telefonica SA-led holding company that owns 22.4 percent of the carrier, according to a person with knowledge of the matter, who asked not to be identified because the deliberations are confidential.