European shares end down on US inflation worries

European stocks ended lower yesterday after a stronger-than-expected rise in US producer prices aggravated inflation worries, while a crude oil price under $64 a barrel weighed on the oil and gas-producing sector.

European equity markets had initially inched upwards, helped by quarterly earnings from Swiss drugmaker Novartis, which beat expectations and rose 4.3 per cent to become the top European gainer, pulling the pharmaceutical sector higher.

News that US producer prices shot up by an unexpectedly large 1.9 per cent last month, the biggest gain in more than 15 years, injected fresh concern about rising inflation and the future pace of interest rate hikes by the Federal Reserve.

European shares fell after the data.

The pan-European FTSEurofirst 300 index posted an unofficial close of 1,192.7 points, down 0.2 per cent, after falling to 1,190.8. Britain's FTSE 100 slipped 0.4 per cent to 5,263.9 points.

"The catalyst for this was the sharp rise in the US Producer Price Index, with the 1.9 per cent jump in September coming in at more than analysts were expecting, and fuelling fears of increased inflation creeping back into the US economy," said David Jones, chief market analyst at CMC Markets.

The oil and gas sector was generally weaker, with the crude oil price down more than a dollar as the forecast track of tropical storm Wilma, now a hurricane, showed it would spare production rigs and refineries in the Gulf of Mexico.

Shares in Italy's Eni slipped 1.9 per cent and shares in electricity utility Enel fell 0.7 per cent after Prime Minister Silvio Berlusconi said they could be among the first in line for further privatisations.

"The announcement of another placement has depressed the shares," one trader said.

Among the region's oil blue chips, BP lost 1.5 per cent, while Suez was down 1.1 per cent. Norway's Statoil lost 3.8 per cent.

The pharmaceutical sector was higher, with Roche Holding gaining 2.5 per cent and GlaxoSmithKline up 1.1 per cent, also helped by future hopes for new drugs.