Fears over inflation drag European stocks lower

Eurostoxx 50: 3,025.68 (–5.94) Frankfurt DAX: 7,319.82 (–1.08) Paris CAC: 4,084.56 (–6.18)EUROPEAN STOCKS declined for a third day yesterday, amid growing concern that accelerating global inflation will lead to higher borrowing costs.

The benchmark Stoxx Europe 600 Index fell 0.2 per cent to 286.72 in London. The gauge reached the highest level since September 2008 earlier this week amid optimism that the economic recovery is accelerating and policies to support indebted countries using the euro will succeed.

“Institutional investors have been selling in the last few days because of a fear of inflation,” said Martin Huefner, chief economist at Assenagon GmbH in Munich. “The optimistic view of a cyclical recovery might be a bit exaggerated. We’re also a bit worried about the performance of stocks in emerging markets.”

European stocks pared their losses as a report showed the number of Americans filing first-time claims for unemployment insurance fell to the lowest since July 2008 last week.

Air France dived 7.7 per cent to €12.57, the biggest drop since April. Europe’s second-biggest airline by sales posted an unexpected loss in its fiscal third quarter of €46 million ($62.6 million) and cut its full-year forecast.

Lufthansa dropped 2.6 per cent to €15.48.

International Consolidated Airlines, owner of British Airways and Iberia Lineas Aereas de Espana, slid 4 per cent to 249.3p.

Credit Suisse, Switzerland’s second-largest bank, lost 5.7 per cent to 42.17 Swiss francs.

Danske Bank sank 11 per cent to 125.10 kroner after Denmark’s largest lender reported fourth-quarter profit that missed estimates.

Diageo fell 5 per cent to 1,190p after the world’s biggest distiller reported first-half revenue and profit that missed analysts’ estimates as growth in developing markets failed to offset declines in European countries.

Deutsche Boerse advanced 3.6 per cent to €60.50. The company’s acquisition of NYSE Euronext in an all-stock transaction would create the world’s biggest exchange operator.

Alcatel-Lucent rallied 18 per cent to €3.15. France’s largest telecommunications equipment maker posted fourth-quarter net income that beat analysts’ estimates. – (Bloomberg)