(Corrects paragraph 12 to remove reference to Alpha Auto Group and clarify that offer for Lookers was made by Global Auto Holdings)
By Shreyashi Sanyal
(Reuters) -German stocks led the decline among European peers on Tuesday as shares of speciality chemicals maker Lanxess plunged after lowering its earnings forecast, while a modest interest rate cut by China did little to lift investor sentiment.
Germany's DAX index fell 0.3% by 0750 GMT, retreating farther from a record high hit on Friday. The continent-wide STOXX 600 index edged 0.1% lower.
Lanxess slid 15.4% to its lowest level in over three years after cutting its second-quarter and annual core profit forecasts, saying it saw no demand recovery in June as customers continued to destock.
The chemicals index slid 1.7%, leading sectoral declines.
China cut its key lending benchmarks on Tuesday, with investors worrying that it may be too small to jumpstart a slow economic recovery and awaited a wider stimulus package.
"I think the market had got a little carried away with what it was expecting," said Stuart Cole, chief macro economist at Equiti Capital.
"The cuts today have matched the 10 bps cut delivered by the People's Bank of China last week but the market was looking for a larger reduction."
The China-exposed basic resources index dropped 0.6%.
Defensive sectors such as utilities and healthcare led the advances on the day.
Sanofi boosted healthcare stocks as it rose 2.5%.
The French drugmaker said the International Chamber of Commerce ruled in its favour in an arbitration case over claims by Boehringer Ingelheim that Sanofi should be liable for ongoing Zantac litigation in the United States.
British auto retailer Lookers jumped 33.7% as Global Auto Holdings said it will buy the peer for about 465.4 million pounds (about $595 million) in cash.
Also in the UK, the focus is on elevated mortgage rates ahead of key inflation data due on Wednesday and the Bank of England's policy meeting on Thursday.
London's FTSE 100 index rose 0.2%.
Investors now await the testimony from U.S. Federal Reserve Chair Jerome Powell on Wednesday and Thursday for further cues on the monetary policy outlook for the world's largest economy.
(Reporting by Shreyashi Sanyal in Bengaluru; editing by Eileen Soreng)
