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Sun, Jun 15, 2008 - Page 10 News List

EUROPE: Fear of rate hikes drags Europe down for a second week

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European stock indexes dropped for a second week, the first back-to-back decline since March, on concern accelerating inflation may push central banks to raise interest rates.

ABB Ltd, the world’s largest builder of power networks, and Vinci SA, the biggest construction company, slid. Barratt Developments PLC led UK homebuilders lower after Merrill Lynch & Co recommended selling the shares as the housing market deteriorates. Bayerische Motoren Werke AG slipped after Goldman Sachs Group Inc downgraded the stock.

The Dow Jones STOXX 600 Index sank 1.5 percent to 305.70, capping its worst two weeks since January. The gauge has fallen 16 percent this year on speculation credit-related losses approaching US$400 billion and rising oil prices will erode earnings.

“Inflation poses a real problem,” said Guillaume Duchesne, a Geneva-based strategist at Fortis Private Banking, which oversees the equivalent of US$117 billion. “We’re worried about rising interest rates in the US and Europe. We have difficulty finding positive elements that would sustain a rally in stocks.”

National benchmark indexes retreated in all of the 18 western European markets except Spain. Germany’s DAX Index fell 0.6 percent. France’s CAC 40 lost 2.4 percent. The UK’s FTSE 100 slipped 1.8 percent. The STOXX 50 retreated 0.9 percent, and the Euro STOXX 50, a measure for the euro region, slid 1 percent.

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