By Ana Nicolaci da Costa
LONDON, Feb 20 (Reuters) - European shares fell early on
Wednesday, led by oil stocks and telecoms, as British lender
Alliance & Leicester <ALLL.L> kept nerves on edge after taking a
writedown and warning of higher funding costs ahead.
At 0954 GMT, the FTSEurofirst 300 index <> was down
0.6 percent to 1,328.94 points, as losses on Wall Street and in
Asia helped to set a negative tone.
Shares in Alliance & Leicester tumbled more than 14 percent
after its 2007 profit plunged by around a third and it suffered
a $360.4 million writedown on its exposure to risky assets.
Dealers said investors were switching out of the mortgage
lender, which also warned its key net interest margin would be
hit in 2008 by higher funding costs, into Barclays.
Barclays, Britain's third-biggest bank, rose 3.6 percent.
Elsewhere, BNP Paribas <BNPP.PA> posted lower fourth-quarter
profits that were in line with the bank's previous guidance and
after announcing a total of 898 million euros of writedowns
during the fourth quarter.
But France's biggest listed bank said it was confident of
its business growing in 2008, helping the stock up 0.8 percent.
"The reporting season has generally seen numbers come down
but in most cases the downward revisions have been relatively
modest and more modest than investors clearly fear will be the
case for the year as a whole," said Darren Winder, equity
strategist at Cazenove.
Dutch financial services group ING <ING.AS> rose 5.2
percent, making it the index's best performer, after taking a
lower-than-expected impairment charge of 194 million euros on
its riskier investments in its fourth-quarter results.
But the telecoms sector weighed on the index.
Vodafone <VOD.L> fell 2.8 percent after its joint venture in
the United States, Verizon Wireless, said it had started
offering flat-rate plans for unlimited calls, raising investors
concerns that a price war could break out.
INFLATION SCARE
The market tone was set by losses on Wall Street and in Asia
as a surge in oil to a record above $100 fuelled fears inflation
could limit the scope for major central banks to cut rates at a
time when the global economy is slowing.
"There is now a discussion that people are starting to have
about whether inflation issues are starting to be a constraint
on further Fed (Federal Reserve) easing," Winder added.
Major central banks have been under pressure to cut interest
rates to help an ailing global economy, but evidence that price
pressures are building has made the outlook for rates uncertain.
Analysts fear soaring oil prices would make it even more
difficult for central banks to continue easing credit. They
found some comfort in the fact that prices eased slightly on
Wednesday to around $99 a barrel.
But this made oil stocks the worst performers, with Total
<TOTF.PA> down 1.1 percent, BP <BP.L> down 1.5 percent and Royal
Dutch Shell <RDSa.L> 0.7 percent lower.
Also weighing on stocks was a filing from KKR Financial
Holdings <KFN.N> that said it had delayed repayment of debt
backed by mortgage-backed securities for the second time.
Around Europe, Britain's FTSE 100 <>, Germany's DAX
<> and France's CAC 40 <> all fell 0.7 percent.
Dutch brewer Heineken NV <HEIN.AS> reported 2007 net profit
in line with its guidance but its shares fell 5.6 percent --
making it among the biggest losers on the index -- as analysts
expressed disappointment at the lack of a concrete 2008 outlook.
Elsewhere in the sector, SABMiller <SAB.L> was down 4.8
percent and InBev <INTB.BR> shed 3.6 percent.
(Editing by Quentin Bryar)
