European stocks declined, following the longest rally for the region’s equities in 40 months, as companies from Orange SA to STMicroelectronics NV (STM) reported lower quarterly sales.

The Stoxx Europe 600 Index retreated 0.7 percent to 318.61 at 4:30 p.m. in London. The equity benchmark has still gained 2.6 percent so far this month as U.S. lawmakers agreed to extend the government’s borrowing authority until 2014.

The European Central Bank confirmed today that it will require lenders to have a capital ratio of 8 percent. It also changed the rules for what qualifies as capital.

‘Suppurating Sores’

“There are some festering sores suppurating in the European banks which will have to be addressed,” Justin Urquhart Stewart, who helps oversee about $6.8 billion at Seven Investment Management Ltd. in London, wrote in an e-mail. “European markets will take note of the European Central Bank’s 8 percent capital requirement for banks.”

National benchmark indexes in every Western-European market, except Switzerland and Iceland, declined today.

FTSE 100 6,674.48 -21.18 -0.32% CAC 40 4,260.66 -34.77 -0.81% DAX 8,919.86 -27.60 -0.31%

Orange dropped 5.3 percent to 10.09 euros after posting profit excluding some items that declined 7.7 percent as cost cuts failed to offset falling sales. Earnings before interest, taxes, depreciation and amortization of 3.37 billion euros ($4.6 billion) still beat the average analyst estimate of 3.34 billion euros.

STMicroelectronics tumbled 9.6 percent to 5.77 euros after taking a $120 million impairment charge for the third quarter. The company posted a $478 million loss in the year-earlier period. STMicro also delayed a profitability target after splitting up its venture with Ericsson AB.

Bankinter SA and Banco Popular Espanol SA retreated 4.8 percent to 4.33 euros and 2.5 percent to 4.06 euros, respectively, as a gauge of lenders posted the biggest decline on the Stoxx 600.

Heineken NV fell 4.5 percent to 50.46 euros. The world’s third-biggest brewer predicted that full-year profit will decline by a low single-digit percentage. It had forecast profit would be in line with 2012. The brewer of the eponymous lager posted third-quarter sales that missed estimates amid weak consumption in central and eastern Europe.

GlaxoSmithKline Plc lost 1.9 percent to 1,570.5 pence after it said third-quarter sales of pharmaceuticals and vaccines dropped 61 percent in China. The country’s authorities began a probe into alleged corruption involving the company in July. The U.K.’s biggest drugmaker said total revenue rose 1 percent to 6.51 billion pounds ($10.5 billion), missing the 6.64 billion-pound average estimate of analysts.