(Bloomberg) — European stocks had their biggest weekly drop in more than two months as the dollar slumped against the euro and the pound. DaimlerChrysler AG and ING Groep NV led a slide by companies that rely on the US for sales.“The dollar’s decline is a pretty big factor and is a negative for the market,” said Job Curtis, who manages about $2.2 billion at Henderson Global Investors in London. “A lot of companies generate a significant amount of profit in dollars.” European companies get a fifth of their sales from the US.

Royal BAM Groep NV lost more than any other stock after the biggest Dutch builder cut its full-year forecast. Credit Agricole SA was Europe’s third-worst performer, falling after France’s second-largest bank by assets posted its smallest quarterly profit increase in almost three years.

The Dow Jones Stoxx 600 Index lost 0.6 percent to 355.98 this week. That was the worst performance since the week ended September 8. The Stoxx 50 declined 1.1 percent, while the Euro Stoxx 50, a gauge for the 12 nations using the euro, fell 0.8 percent. Speculation that mergers and acquisitions will increase limited the losses. London Stock Exchange Plc led European exchange operators higher after Nasdaq Stock Market Inc. renewed its bid for the company.

The dollar slid to $1.3082 against the euro, the lowest in 19 months, and to $1.9308 versus the pound, its weakest against the British currency in almost two years. It also slumped against the Swiss franc and other European currencies.

A weaker dollar makes European goods more expensive for consumers in the world’s biggest economy, and reduces the value of earnings in the US currency when repatriated to Europe.

The dollar’s decline “is very bad news for most large companies in Europe,” said Jacques Porta, who helps oversee $180 million at Ofivalmo Patrimoine in Paris. “It is a region that’s highly dependent on exports.” DaimlerChrysler, the German carmaker that gets about 45 percent of sales in the U.S., dropped 3.4 percent on the week. Bayerische Motoren Werke AG, the world’s largest maker of luxury cars, slid 3.5 percent. North America accounts for a quarter of BMW’s sales.

ING, the biggest Dutch financial-services company, which depends on the Americas for about 40 percent of its revenue, dropped 3.8 percent. GlaxoSmithKline Plc slid 2.6 percent. Europe’s largest drugmaker generates almost half of its sales in the US. National benchmarks fell in 11 of the 18 western European markets. Germany’s DAX was little changed. France’s CAC 40 lost 0.9 percent. The U.K.’s FTSE 100 Index declined 0.3 percent.

Royal BAM slumped 14 percent. The Dutch builder cut its annual profit forecast and suspended managers at a German construction unit after costs soared and unprofitable projects added to losses.

Credit Agricole, France’s second-largest bank by assets, dropped 6.9 percent after the bank posted a 12 percent rise in third quarter profit, its smallest in almost three years. Citigroup Inc. lowered its recommendation on the stock to “sell” from “hold.”

London Stock Exchange surged 8.5 percent after Nasdaq Stock Market made its second bid for the bourse this year. The offer values the London exchange at about 2.7 billion pounds ($5.2 billion).

Euronext NV, Europe’s second-largest stock exchange, soared 9.7 percent. The bourse has set a date for shareholders to vote on a $15 billion takeover offer from NYSE Group Inc., which last week moved closer to acquiring Euronext after Deutsche Boerse AG scrapped its bid for the Paris-based market.

Imperial Chemical

Deutsche Boerse, operator of the Frankfurt Exchange, surged 10 percent.

Mergers and acquisitions worldwide have risen to an all-time high of $3.2 trillion this year, with Europe accounting for about 47 percent of the deals.

Imperial Chemical Industries Plc climbed 7.9 percent after Givaudan SA, the world’s biggest flavoring maker, agreed to buy the company’s fragrances unit for 1.2 billion pounds ($2.3 billion). Shares of Givaudan added 4.3 percent.

Technip SA rallied 11 percent amid speculation Europe’s second-largest oil-services company may be a takeover target. Eni SpA, Europe’s fourth-largest oil company, may offer to buy the French company next week, La Tribune said, without citing anyone.

A spokesman for Technip said no approach had been made. Eni declined to confirm or deny the report.

Air France-KLM, Vestas

Shares of Air France-KLM Group dropped 5 percent after Europe’s largest airline revived talks with unprofitable Alitalia SpA. Italy’s Alitalia, which hasn’t reported a profit since 2002, said it is in “exploratory talks” with Air France that could include a combination.

Analysts at ABN Amro Holding NV lowered their recommendation for Air France shares to “sell” from “hold.”

DSG International Plc, the U.K.’s largest consumer- electronics retailer, retreated 7.1 percent after first-half profit was little changed because of slumping sales in Italy. The shares slid the most in three years as DSG said revenue at Italian UniEuro stores open at least a year fell 10 percent.

Vestas Wind Systems A/S, the best performer on the Stoxx 600 this week, surged 21 percent. The world’s largest maker of wind turbines forecast a 22 percent gain in sales next year because of higher demand for wind power.

<\m>With reporting by Alexis Xydias and Rishaad Salamat in London. Editor: Kohut.

To contact the reporter on this story: Sarah Jones in London at +44-20-7673-2419 or sjones35bloomberg.net

To contact the editor responsible for this story: Balduin Hesse at +44-20-7073-3474 or bhesse2bloomberg.net.

-0- Nov/25/2006 08:39 GMT