European stocks retreated, following their biggest rally in two months, as investors awaited the outcome of a two-day Federal Reserve meeting starting today.

The Stoxx Europe 600 Index dropped 0.7 percent to 311.57 at 4:30 p.m. in London. The measure added 1.3 percent yesterday after euro-area manufacturing rose more than forecast. It has fallen 4.2 percent this month as better-than-estimated U.S. economic data led some investors to speculate the Fed will decide to slow bond purchases as early as this week.

About 34 percent of economists surveyed by Bloomberg on Dec. 6 predicted that the Fed will start paring its $85 billion of monthly bond purchases when it concludes the two-day policy meeting tomorrow.

German investor confidence increased for a fifth month in December. The ZEW Center for European Economic Research in Mannheim said its index of investor and analyst expectations, which aims to predict economic developments six months in advance, rose to 62 from 54.6 in November. Economists predicted an increase to 55, according to the median estimates.

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

FTSE 100 6,486.19 -36.01 -0.55% CAC 40 4,068.64 -51.24 -1.24% DAX 9,085.12 -78.44 -0.86%

CGG (CGG) plunged 17 percent to 12.08 euros after cutting its 2013 earnings before interest and taxes target to $400 million to $420 million from a previous projection of $470 million. The company said market conditions remain difficult and that clients continue to delay large projects.

BP Plc fell 1.4 percent to 466.8 pence. The Financial Times reported that lawyers representing businesses seeking compensation for losses incurred from the 2010 Gulf of Mexico spill said the oil company attempted to mislead the court when it won an injunction earlier this month on payments to some claimants. The report cited BP as saying it stood by its evidence.

Rexel retreated 1 percent to 18.25 euros. Ray Investment said it completed the sale of 20 million shares in the electrical-equipment distributor at 17.90 euros apiece.

DKSH Holding AG (DKSH), which advises businesses on how to grow in Asia, lost 3.8 percent to 65.60 francs, its lowest price in almost a year. Credit Suisse Group AG downgraded the stock to underperform from neutral, meaning investors should sell the shares, and lowered its price estimate by 28 percent to 60 francs. Credit Suisse said protests and political changes in Thailand, where DKSH generated 36 percent of its revenue in 2012, could disrupt business and damp demand.

Zurich Insurance rose 1.9 percent to 248.10 Swiss francs. The insurer had been seeking a CFO since the suicide of Pierre Wauthier in August. Vibhu Sharma has been filling the position on an interim basis. Quinn will leave Swiss Re at the end of April.