European stocks retreated for a third day as Moody’s Investors Service lowered its credit outlook for Germany and a measure of manufacturing in the Richmond region of the U.S. plunged.

Elan Corp. tumbled 11 percent after the results of a study for an Alzheimer’s drug failed to show that patients’ symptoms improved. Royal KPN NV (KPN) fell 7.3 percent as the company cut its dividend forecast by 61 percent after quarterly net income missed analysts’ estimates. Swatch Group AG (UHR) gained 2.3 percent after posting sales and profit that increased. Man Group Plc (EMG) surged 4.1 percent after saying it will double its cost cuts.

The Stoxx Europe 600 Index (SXXP) slipped 0.5 percent to 250.57 at the close of trading in London.

Germany, the Netherlands and Luxembourg had the outlooks for their Aaa credit ratings lowered to negative by Moody’s after markets closed yesterday. The ratings company cited the risk that Greece will leave the 17-nation euro currency and the “increasing likelihood” of collective support for European countries such as Spain and Italy, according to a statement.

German manufacturing and services output contracted in July more than economists had forecast. An index based on a survey of purchasing managers in the manufacturing industry declined to 43.3 this month from 45 in June.

National benchmark indexes in 15 of the 18 western-European markets retreated today.

FTSE 100 5,499.23 -34.64 -0.63% CAC 40 3,074.68 -26.85 -0.87% DAX 6,390.41 -28.92 -0.45%

STMicroelectronics NV (STM) dropped 4.3 percent to 3.77 euros, after earlier declining as much as 7 percent. Europe’s largest chipmaker forecast third-quarter revenue will grow by about 2.5 percent, indicating sales will miss analysts’ estimates amid weaker demand for the company’s products.

Endesa SA (ELE) fell 5.8 percent to 11.63 euros.

Swatch rose 2.3 percent to 369.90 Swiss francs. The biggest maker of Swiss watches reported first-half profit that beat analysts’ estimates as sales of Omega and Longines timepieces to Chinese consumers increased.

Man Group rallied 4.1 percent to 72 pence. The world’s biggest publicly traded hedge fund manager also said it plans to sell fewer so-called guaranteed products that generate high commissions for employees.

Software AG (SOW) rallied 11 percent to 25.98 euros after the company raised the forecast for its Enterprise Transaction Systems in 2012. Germany’s second-biggest software maker also posted a 46 percent increase in revenue from its Business Process Excellence licenses in the second quarter.

SAP AG (SAP) climbed 3.5 percent to 50.77 euros. The largest maker of business-management software is beating rivals to contracts as companies limit their spending amid slowing economies.

Croda International Plc (CRDA) gained 6.1 percent to 2,364 pence, its lowest price since at least 1989. The maker of cosmetic ingredients reported first-half pretax profit before one-off items of 67.5 million pounds ($105 million). That beat the average estimate of 66.2 million pounds in a survey of analysts