* FTSEurofirst 300 down 0.9 pct
* Banks, retailers lead decline
* Record-high oil fans inflation fears
By Amanda Cooper
LONDON, June 27 (Reuters) - European shares staged a
broad-based fall on Friday, led by banks and retailers, against
a backdrop of deepening concern over the outlook for corporate
profitability and fears over inflation.
Banks were once again the worst performing sector in Europe.
The DJ Stoxx index of European banks <.SX7P> hit its lowest
level in three years, falling 1 percent on concern about bank
profitability, as a number of major institutions have bulked up
balance sheets that have been ravaged by the credit crunch.
UniCredit <CRDI.MI> fell 2 percent, BNP Paribas <BNPP.PA>
fell 2.7 percent and UBS <UBSN.VX> fell 4.1 percent.
French supermarket group Carrefour <CARR.PA> was one of the
largest drags on the broader market, with the stock falling
nearly 7 percent and extending Thursday's losses, as investors
worried about the impact of a slowing economy and high borrowing
costs on consumer spending.
Other retailers dropped. Tesco <TSCO.L>, Ahold <AHLN.AS> and
Sainsbury <SBRY.L> fell between 2.5 and 3.0 percent.
By 0849 GMT the FTSEurofirst 300 index <> of top
European shares was down 0.6 percent at 1,190,31 points, having
earlier hit its lowest level since late October 2005.
The European market is on track for its fourth successive
weekly decline.
"It is not a matter of companies doing badly," said Justin
Urquhart Stewart, investment director at Seven Investment
Management.
"They're doing what we thought they would be doing, but
analysts still have far too optimistic expectations, which is
why you're getting this realignment," he said, of the fall in
the broader equity market.
"There is concern over one or two of the banks in
continental Europe, you can hear something ticking, but you're
not sure what it means and markets aren't going to have any
strength."
Shares in France's Natixis <CAGR.PA> lost over 6 percent
after the bank said its two controlling shareholders have each
granted a 500 million euro advance to the group, while Deutsche
Bank <DBKGn.DE> was down nearly 3 percent after Citigroup said
in a research note pressure may be growing on Germany's largest
bank to raise capital.
OIL REIGNITES INFLATION FEARS
Crude oil futures <CLc1> hitting a record high helped energy
stocks but deepened existing fears about the impact of inflation
on an already slowing global economy.
Total <TOTF.PA> was up 1.3 percent, while Royal Dutch Shell
<RDSa.AS> gained 1.6 percent, BG Group <BG.L> rose 1.9 percent
and ENI <ENI.MI> rose 0.7 percent.
"Inflation has been misjudged since the end of last year,"
said Heino Ruland, a strategist at FrankfurtFinanz.
"Central bankers are worrying about it at rather a late
stage, so in order to convince markets that they will be able to
combat inflation, they will need to do more than they would
otherwise do," he said.
"You're not talking about one hike, you're talking about
three hikes and they're happening sooner rather than later," he
said, referring to the European Central Bank, which meets next
week to discuss policy and may raise rates.
The twin forces of inflation and the fallout from the credit
crunch have hit European shares this year. The FTSEurofirst 300
is down 21 percent so far in 2008 and in on track for its worst
June on record, with a 11 percent decline.
Among other stocks on the move was Belgian pharmaceutical
group UCB <UCB.BR>, which rose 3.7 percent after saying it would
launch its new epilepsy drug Vimpat in the autumn after gaining
approval from the European Medicines Agency this week.
Later in the day, investors will look out for U.S. data on
consumer inflation, as reflected by the core PCE index, at 1230
GMT, as well as a final read of June consumer sentiment at 1355
GMT.
(Editing by David Cowell)
