Eu­ro­pean stocks re­treat­ed for a sec­ond straight day as vol­ume tum­bled be­fore the Christ­mas hol­i­day and con­cern grew US pol­i­cy mak­ers won't meet a year- end bud­get dead­line.

D'Ieteren SA sank 17 per cent af­ter say­ing its 2012 prof­it de­cline will be deep­er than ear­li­er pro­jec­tions. British Amer­i­can To­bac­co Plc, the par­ent com­pa­ny of The West In­di­an To­bac­co Com­pa­ny (Wit­co) dropped 1.3 per cent.

UBM Plc, the pub­lish­er of In­for­ma­tion­Week, rose 1 per cent, fol­low­ing a gauge of me­dia shares high­er.

The Stoxx Eu­rope 600 In­dex fell 0.1 per cent to 280.6 at 1:40 p.m. Lon­don time fol­low­ing a short­ened day of trad­ing.

The vol­ume of trans­ac­tions plunged 70 per cent.

The gauge has still ral­lied 15 per cent this year as Eu­ro­pean Cen­tral Bank pol­i­cy mak­ers agreed on an un­lim­it­ed as­set-pur­chase pro­gram and the Fed­er­al Re­serve an­nounced a third round of quan­ti­ta­tive eas­ing.

"We are get­ting clos­er to the end of the year and, de­spite the com­mon view that Re­pub­li­cans and De­moc­rats should find a way through to avoid the fis­cal cliff, no agree­ment is on the ta­ble yet," said Jean-Paul Jeck­el­mann, chief in­vest­ment of­fi­cer at Banque Bon­hote & Cie in Neucha­tel, Switzer­land, who helps man­age US$1.4 bil­lion in eq­ui­ties. "Mar­kets are most­ly closed so there is lit­tle in­cen­tive to take po­si­tions."

Ex­changes in ten of the 18 west­ern Eu­ro­pean na­tions were shut to­day, in­clud­ing Ger­many, Switzer­land and Italy. The oth­er mar­kets closed ear­ly.

The num­ber of shares chang­ing hands in the Stoxx 600 was 70 per cent low­er than the 30-day av­er­age, ac­cord­ing to da­ta com­piled by Bloomberg. Vol­umes on the UK's FTSE 100 In­dex re­treat­ed 45 per­cent.

The Stoxx 600 has risen for five straight weeks, the longest stretch of gains in four months, as in­vestors await­ed de­vel­op­ments in US talks to avoid the so-called fis­cal cliff.

Time is run­ning out for US law­mak­ers to agree on a bud­get deal to avoid trig­ger­ing more than US$600 bil­lion in tax in­creas­es and spend­ing cuts in Jan­u­ary, Sen­a­tor Joseph Lieber­man said.

The odds are that Re­pub­li­cans and De­moc­rats won't be able to reach a deal in the low­er house and Sen­ate lead­ers now must take charge of re­solv­ing the stale­mate, Lieber­man, a re­tir­ing Con­necti­cut in­de­pen­dent, said on CNN's "State of the Union" pro­gram.

In Eu­rope, Ital­ian Prime Min­is­ter Mario Mon­ti said he won't run in the coun­try's elec­tions in Feb­ru­ary, though he would con­sid­er be­ing the can­di­date for a coali­tion back­ing his eco­nom­ic agen­da.

Mon­ti an­nounced his res­ig­na­tion on De­cem­ber 21, paving the way for elec­tions on Feb­ru­ary 24-25.