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By Bloomberg

European stocks fell, dragged down by energy producers, as oil traded near a four-month low amid a global glut. The pound approached its strongest level against the euro since 2007 before the Bank of England releases its interest-rate decision.

Shares of energy companies headed for their biggest decline in more than a week, sending the Stoxx Europe 600 Index down 0.5 percent at 6:40 a.m. in New York. West Texas Intermediate crude retreated for a second day. The pound appreciated 0.1 percent to 69.80 pence per euro while Spanish and Italian bonds rebounded from Wednesday’s slump. Polish banks tumbled on government plans to aid mortgage holders.

U.S. oil production increased last week by the most since May, prompting speculation a supply surplus that drove prices into a bear market will be prolonged. The slide in commodity prices risks muddying the outlook for monetary policy markers just as the BOE and Federal Reserve start to consider raising interest rates. Investors will learn on Thursday how many U.K. officials voted for an increase this week, and receive data on U.S. jobless claims before Friday’s monthly payrolls report.

“If oil hovers at a certain level then we assume it has bottomed, and then we are hit with another massive selloff,” said Ben Kumar, who helps manage about $14 billion at Seven Investment Management. “It’s hard to factor in what this will do to energy companies, and that gets people nervous. The real game in town is the Fed, and that will dominate thinking for most of August.”

The Stoxx 600 slipped after its biggest rally in three weeks, while the Standard & Poor’s 500 Index futures gained less than 0.1 percent.

Trailing Forecasts

Zurich Insurance Group AG lost 3.9 percent and Danish biotechnology company Novozymes A/S sank 9.6 percent after reporting profits that missed analysts estimates. Deutsche Post AG dropped 2.9 percent as it cut its full-year earnings forecast.

The MSCI Emerging Markets Index declined 0.7 percent, headed for the lowest close in two years, with benchmark gauges in Malaysia, Poland and Taiwan dropping more than 1 percent.

Russia’s ruble slid 0.9 percent to the weakest level since February and Malaysia’s ringgit extended losses at an almost 17- year low. South Korea’s won rebounded from near a three-year low as some investors judged recent declines excessive.

WTI fell 1 percent to $44.69 a barrel and Brent slipped 0.5 percent to $49.34.

Rising Output

Oil touched the lowest level in more than four months in New York after U.S. government data showed crude production rose 52,000 barrels a day to 9.465 million a day last week, the biggest gain since May. U.S. crude stockpiles remain more than 90 million barrels above the five-year seasonal average.

U.S. natural gas futures slid 1 percent, declining for a second day amid forecasts for cooler weather.

Sterling has climbed against every major currency except the Swiss franc this year in anticipation of an increase in interest rates by the BOE. It touched 69.36 pence per euro on July 17, the strongest since November 2007.

The BOE will reveal its interest-rate decision and how officials voted, as well as publishing a quarterly Inflation Report, at noon in London. Governor Mark Carney will start a press conference 45 minutes later.

Rate Bets

Traders are pricing in a 48 percent probability that the Fed will raise interest rates in September, based on the assumption that the effective fed funds rate will average 0.375 percent after the first increase. The odds jumped on Wednesday, pushing bonds lower in Europe and the U.S., after a report showed strengthening service-sector growth.

Italian and Spanish government debt recovered some of the losses on Thursday. Italy’s 10-year bond yield fell four basis points to 1.88 percent and Spain’s dropped five basis points to 2.02 percent.

Treasury 10-year note yields were little changed at 2.27 percent.

Polish banks slumped, sending the WIG20 Index down 2.9 percent. The gauge dropped the most among 93 indexes tracked by Bloomberg worldwide after parliament approved an unexpected change in a plan to provide financial aid to Swiss-franc mortgage holders, potentially doubling the cost for banks.

Chinese Shares

Chinese stocks retreated, with the Shanghai Composite Index dropping 0.9 percent. Volumes on the index have been falling amid concern government intervention designed to prevent another stock rout is driving away investors.

Greece’s benchmark ASE Index rose for the first time since trading was halted in June for five weeks and resumed Aug. 3. The gauge gained 3.4 percent after a three-day drop. National Bank of Greece SA climbed 22 percent and Alpha Bank AE gained 5.4 percent.

S&P 500 E-mini futures expiring in September were little changed after the index climbed for the first time in four days.

Tesla Motors Inc. fell 6.3 percent in early New York trading after the electric-car maker backed off its full-year vehicle sales forecast. Keurig Green Mountain Inc. tumbled 29 percent after the maker of single-serve coffee systems cut revenue and profit projections.

Viacom Inc. is among 14 S&P 500 companies reporting earnings on Thursday. Of the 426 S&P 500 companies that have reported results this season, about 74 percent beat analysts’ profit estimates, while 49 percent topped sales projections.