BL: European Stocks Fall on Inflation Concern; U.S. Futures Decline
By Sarah Thompson
May 13 (Bloomberg) -- European stocks fell, led by financial companies, on concern accelerating inflation will keep central banks from lowering interest rates. U.S. index futures and shares in China dropped.
Barclays Plc, Britain's third-biggest bank, and Alliance & Leicester Plc retreated as inflation in the U.K. jumped the most since 2002. Societe Generale SA declined for a sixth day after reporting a 23 percent decline in first-quarter profit, while Fortis slipped to a one-month low on more writedowns. Wal-Mart Stores Inc. fell after its forecast trailed some analysts' estimates. China Life Insurance Co. slumped following the biggest earthquake in the country in 58 years.
Europe's Dow Jones Stoxx 600 Index slipped 0.5 percent to 324.21 as of 12:58 p.m. in London. The index has lost 19 percent from a 6 1/2-year high on June 1 on concern $329 billion in credit losses by the world's largest financial firms will cut economic and profit growth.
``European markets are dropping off because the odds of an inflation problem have just gone up,'' said Simon Carter, who manages $3 billion at Aegon Asset Management in Edinburgh. ``Indeed, slowing growth and increased inflationary pressures makes a central bank's job extremely difficult.''
Futures on the Standard & Poor's 500 Index lost 0.4 percent. China's CSI 300 dropped 1.4 percent.
National benchmark indexes retreated in 14 of the 18 western European markets. The U.K.'s FTSE 100 slipped 0.9 percent. France's CAC 40 slid 0.4 percent, and Germany's DAX lost 0.3 percent.
Consumer Prices
Barclays fell 1.9 percent to 436.5 pence. HBOS Plc, the U.K.'s largest mortgage lender, dropped 4.3 percent to 483.75 pence.
Alliance & Leicester decreased 10 percent to 459.25 pence. The British bank that lost more than half its market value in the past year fell the most since September after announcing writedowns of 391 million pounds ($763 million).
Consumer prices climbed 3 percent from a year earlier, compared with 2.5 percent in March, the Office for National Statistics said today in London. The result was the highest in 13 months and exceeded the 2.6 percent median prediction of 37 economists in a Bloomberg News survey.
``Given most of the inflation pressures are global, it may also be possible to read across'' to the European Central Bank, said Tony Dolphin, director of strategy and economics at Henderson Global Investors in London, which oversees about $125 billion. ``This increases the chance of inaction there too.''
Societe Generale fell 2 percent to 70.05 euros. France's second-largest bank by market value reported a 23 percent decline in first-quarter profit on increased provisions for risky loans and writedowns tied to the U.S. subprime mortgage market collapse.
Fortis, Wal-Mart
Fortis, part of the group that bought ABN Amro Holding NV in the world's biggest banking takeover, fell 1.3 percent to 16.73 euros. First-quarter profit dropped 31 percent to 808 million euros ($1.26 billion) on structured-credit writedowns. Fortis, which wrote down 1.8 billion euros of asset in the fourth quarter, had an additional 380 million euros of markdowns in the first quarter.
Wal-Mart lost 37 cents to $57.65 in New York. The world's largest retailer said it expects second quarter earnings of 78 cents to 81 cents a share. Analysts in a Bloomberg survey expected 81 cents on average.
The Bentonville, Arkansas-based company said first-quarter profit increased after it cut prices on groceries and pharmacy items to lure consumers strained by higher food expenses and $3.70-a-gallon gasoline. Net income rose to $3.02 billion, or 76 cents a share, beating analysts' estimates.
China Life
China Life, the nation's largest insurer, tumbled 5.5 percent to 31.39 yuan. Citic Securities Co. dropped 3.6 percent to 35.86 yuan. China Petroleum & Chemical Corp., the largest refiner, lost 2.7 percent to 11.76 yuan.
The 7.9-magnitude earthquake, which killed almost 10,000 people, struck 90 kilometers (56 miles) from the central city of Chengdu, the capital of Sichuan province. The province contains 40 percent of China's gas deposits.
Credit Agricole SA dropped 5.1 percent to 19.68 euros. France's third-largest bank by market value said it may raise 5.9 billion euros ($9.2 billion) in a rights offer to replenish capital as first-quarter profit dropped on subprime-related writedowns.
Corporate Express NV, the world's biggest distributor of office supplies, jumped 6.3 percent to 8.09 euros. Staples Inc., the largest office-supplies retailer, increased its takeover bid for Corporate Express to 8 euros a share in an effort to expand sales of pens and paper directly to companies. The offer compares with an original bid of 7.25 euros a share on Feb. 19, Framingham, Massachusetts-based Staples said.
Celesio AG fell 6.3 percent to 25.36 euros. Europe's biggest drug wholesaler said first-quarter profit dropped 44 percent on lower U.K. sales and a weaker pound.
Redrow Plc fell 6.1 percent to 275 pence. This year's second-best performing U.K. homebuilding stock said the number of customer reservations on properties is running 50 percent below year-earlier levels as mortgage lending dries up.
To contact the reporter on this story: Sarah Thompson in London at sthompson17@bloomberg.net
Last Updated: May 13, 2008 08:05 EDT
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