Eurostoxx 50: 2160.28 (-76.40) Frankfurt DAX: 5,606 (-194.24) Paris CAC: 2,894.94 (-102.07)EUROPEAN STOCKS dropped the most in three weeks amid signs that US lawmakers may fail to reach an agreement on budget cuts, raising the prospect that the world's largest economy could face another credit downgrade.

“The US budget situation is a further drag on sentiment,” said Paul Coffin, a fund manager at Fieldings Investment Management in London.

“The market is still being dominated by the European situation. The US budget is probably secondary to the euro zone’s problems.”

KBC led banks lower as dollar funding costs and bond yields climbed. Mining and energy companies dropped with metal and crude oil prices on signs of slowing growth in Asia.

Carrefour slipped 3.2 per cent after the retailer’s largest shareholders were said to consider replacing its chairman and chief executive officer.

Commerzbank plunged 6.8 per cent to €1.36, while BNP Paribas slid 4.3 per cent to €26.85. Total lost 2.9 per cent to €36.02, pacing gauges of mining and energy companies lower.

Copper and oil fell for a third day as Japan’s exports dropped and Singapore warned its economy may grow 1 per cent to 3 per cent in 2012 after expanding 5 per cent this year.

Carrefour slipped 3.2 per cent to €17.84 after people familiar with the matter said shareholders may replace the retailer’s chairman and chief executive Lars Olofsson. Groupe Arnault and Colony Capital, which hold a combined 16.15 per cent of Carrefour and 22.14 per cent of the voting rights, will give Mr Olofsson until the end of the year to improve the company’s performance in its domestic and largest market, said the people, who asked not to be named as the discussions are private.

Adidas declined 3.2 per cent to €48.69 after the Welt am Sonntag newspaper reported the world’s second-largest sporting goods maker will increase prices in 2012 because of higher raw-material prices and wage costs.

Statoil slid 3.1 per cent to 140.90 kroner even after Norway’s national oil company agreed to sell stakes in fields to Centrica for $1.6 billion. Statoil will dispose of stakes in eight fields on the Norwegian continental shelf, it said. – (Bloomberg)