By Amanda Cooper
LONDON, Feb 20 (Reuters) - European shares fell on Wednesday
after Alliance & Leicester <ALLL.L> and BNP Paribas <BNPP.PA>
unveiled debt writedowns and U.S. consumer inflation data rose
more than expected last month.
Banks were among the worst performers on the broader
European market as renewed concern about corporate profitability
in light of difficult conditions in the credit market and a
slowing economic backdrop weighed on the entire sector.
The FTSEurofirst 300 index <> of top European shares
closed down 1.2 percent at 1,321.01 points, having fallen
earlier by as much as 1.8 percent.
Britain's Alliance & Leicester shed nearly 7 percent after
it warned of sharply higher funding costs and took a 185-million
pound ($360.4 million) writedown on risky assets.
BNP Paribas, France's biggest listed bank, took an
898-million-euro writedown during the fourth quarter, leaving
its shares down 0.5 percent.
"Weak economic data, disappointing corporate earnings and
the possibility of future writedowns creates a perfect storm of
uncertainty," said Barclays Wealth strategist Henk Potts.
"People are looking for signs in terms of what is happening
in the U.S. economy and the possible risks associated with that
and the data continues to be a bit disappointing."
The FTSEurofirst 300 has fallen by 20 percent since reaching
a 6-1/2 year high in July last year, dragged down largely by
uncertainty over the outlook for the heavyweight financial
sector as the credit crisis erupted.
Among the banks on Wednesday, HSBC <HSBA.L> was down 1.4
percent, Royal Bank of Scotland <RBS.L> fell 1 percent and
Societe Generale <SOGN.PA> dropped 6 percent.
European credit derivative indexes hit new all-time peaks as
fears of the bank writedowns, unwinding of structured credit
products and the gloomy economic outlook hit sentiment, which
analysts believe will also undermine equities.
Further undermining financials were comments from Juergen
Ruettgers, the premier of the German state of North-Rhine
Westphalia, who said the country's regional state-backed
landesbanks were in crisis.
The region is home to stricken state-owned bank WestLB.
VODAFONE HURTS TELECOMS
Telecoms took a knock after Vodafone's <VOD.L> U.S. joint
venture said it had started offering flat rate plans for
unlimited calls which raised concerns a price war could erupt.
Vodafone shares fell 4.7 percent. Fixed-line telecom groups
Deutsche Telekom <DTEGn.DE> and Telecom Italia <TLIT.MI> shed
between 0.5 and 3.1 percent, while BT <BT.L> lost 1.6 percent.
A 1-percent drop in the price of crude oil futures did
little to dispel concerns about inflation, especially after U.S.
consumer inflation data showed a second monthly increase because
of soaring food costs.
Total <TOTF.PA>, BP <BP.L> and Royal Dutch Shell <RDSa.L>
all fell between 1.6 and 2.5 percent.
"Oil near $100 is worrying people about inflation,
especially about its impact on consumers that can dampen
spending," said BNP Paribas strategist Edmund Shing.
"Two defensive sectors that you would expect to do well are
falling: telecoms on the price war worries and foods and
beverages on commodity price inflation," he added.
Another defensive stock, Dutch brewer Heineken NV <HEIN.AS>,
shed 6 percent after reporting 2007 net profit in line with its
guidance but flagging rising costs in 2008.
Among the few gainers on the broader European market was
Dutch financial services group ING <ING.AS>, which rose 0.9
percent after taking a lower-than-expected impairment charge of
194 million euros on its riskier investments in its
fourth-quarter results.
Around Europe, Britain's FTSE 100 <>, Germany's DAX
<> and France's CAC 40 <> fell 1.2 to 1.5 percent.
(Additional reporting by Ana Nicolaci da Costa and Sitaraman
Shankar)
(Reporting by Amanda Cooper; editing by Elaine Hardcastle)
