European stocks falter

European shares snapped a two-day winning streak yesterday as US economic data sparked new inflation worries and as disappointing earnings stung technology stocks and retailers such as Casino.

Weakness in drugmaker GlaxoSmithKline in the wait for clinical data on its second biggest selling drug, Avandia, was offset by buying in ABN AMRO on fresh talk of bid interest from Bank of America.

Glaxo fell 1.6 per cent while ABN AMRO rose 1.3 per cent. The FTSEurofirst 300 index of top European shares ended 0.05 per cent lower at 1,369.27 points, off a session high of 1,380.23 after US data showed a bigger-than-expected rise in import prices and stronger than expected retail sales.

The reports reignited worries that inflationary pressures may force the Federal Reserve to continue tightening borrowing costs at a time when the world's biggest economy is already showing signs of slowing down.

In its twice-yearly World Economic Outlook, the IMF predicted another year of strong growth for the global economy but warned that rising inflationary pressures and a US economic downturn posed growing dangers.

"These risks are a downturn in the US property market and its fallout on the rest of the economy, but also the risk that the Fed could become harsh and resume monetary tightening if inflation skids," CM-CIC economist Valerie Plagnol said.

Investors today will be waiting for a crucial report on US consumer prices.

Around Europe, London's FTSE 100 index and Paris's CAC 40 both shed 0.3 per cent, while Frankfurt's DAX ended flat and the Swiss Market Index was down 0.4 per cent in Zurich.

There were a number of earnings disappointments, with Nokia off 1.7 per cent after Europe's largest electronics manufacturing services firm Elcoteq cut its third-quarter and 2006 profit and sales forecasts.

In the retail sector, Casino fell 3.6 per cent after posting lower first-half earnings than expected due to stiff rivalry in its home market. GUS slipped 2.7 per cent after reporting a slight slowdown in growth at its credit information business and continued mixed results from its retail operations.

At the higher end of the retail sector, luxury goods group Richemont added two per cent after its sales figures beat analysts' forecasts and it confirmed a robust start to the year.

But takeover talk spurred buying in a number of stocks. United Utilities and Severn Trent rose 1.5 per cent and 2.2 per cent respectively, on consolidation hopes after peer AWG said it had received a preliminary approach. AWG shares finished 11 per cent higher.

And German truck maker MAN AG added 5.1 per cent as a source familiar with the matter said it was planning a mainly cash bid for Swedish rival Scania worth about €9.5 billion. Traders said they were focused on the benefits of a deal for MAN.