By Sitaraman Shankar
LONDON, May 13 (Reuters) - European shares traded flat early
on Tuesday, as British stocks weakened on inflation data and
Credit Agricole <CAGR.PA> weighed after announcing a capital
increase, offsetting gains in defensive utilities and drugs.
At 0854 GMT, the FTSEurofirst 300 index <> of top
European shares was flat at 1,346.23 points.
Miners Rio Tinto <RIO.L> and Anglo American <AAL.L> rose
around 1 percent but banks were mixed. Credit Agricole fell 4.5
percent after saying it planned a capital increase due to
further writedowns at its Calyon investment banking unit.
British lender Alliance & Leicester <ALLL.L> slid 7 percent
after it took a 192 million pound hit to profit from assets
tarnished by a credit crunch, taking its earnings in the first
four months to below 2007 levels.
Societe Generale <SOGN.PA>, the French bank hit by the
world's worst rogue trader scandal, fell 0.1 percent after
first-quarter net profit fell, though it was ahead of analysts'
forecasts.
UBS <UBSN.VX> rose 1.4 percent, HSBC <HSBA.L> gained 0.8
percent and Santander <SAN.MC> put on 0.4 percent.
Analysts said the corporate results season appeared broadly
positive but there could be trouble to come.
"We're tap dancing on fairly thin ice," said Justin Urquhart
Stewart, investment director at Seven Investment Management.
"The euro zone runs at a 9-month lag to the United States,
and the figures are showing us better times, not reflecting what
is going on further ahead," he said.
Aluminium producer Norsk Hydro <NHY.OL> jumped 4.5 percent
to top European gainers in percentage terms, with traders saying
it was set to benefit from supply constraints in the market due
to operational problems for Chinese rivals hit by a large
earthquake.
Drug stocks, which investors buy in uncertain times, were
also up. Roche <ROG.VX> gained 1.2 percent, while
GlaxoSmithKline <GSK.L>, Novartis <NOVN.VX> and Sanofi-Aventis
<SASY.PA> rose 0.6-0.8 percent.
Across Europe, Germany's DAX <> was up 0.2 percent and
France's CAC <> up 0.5 percent, while British stocks
<> fell 0.3 percent after higher than expected inflation
data.
RALLY CONTINUES?
European stocks have notched up handy gains over the past
six weeks, rising 6 percent in April for their best month in
4-1/2 years and adding a further 0.9 percent in May.
British stocks have been a major driver of that growth, and
overall this year have fallen 3.2 percent versus a 10 percent
fall in the FTSEurofirst 300.
The UK gains have been driven by strong rises in commodity
stocks sparked by demand for metals in emerging markets and a
robust oil price, and rate cuts from the Bank of England that
have contrasted with a hawkish stance from the European Central
Bank.
But British inflation data on Tuesday suggested that
consumer price inflation had risen by its biggest amount in
nearly six years, likely denting expectations of further rate
cuts.
"The euro zone will have to cut rates, reflecting the pain
in Spain, Italy and Ireland, while the Bank of England will say
that it has inflationary pressures -- the question is, how
embedded is inflation?" said Stewart.
Tui Travel <TT.L> gained 4 percent to top British-listed
winners after Europe's biggest travel firm said its pretax loss
in the first half narrowed and that current trading in summer
2008 was strong.
Index heavyweight oil also ticked higher despite a fall in
the oil price.
BP <BP.L>, Royal Dutch Shell <RDSa.L> and Total <TOTF.PA>
gained by around 0.2 percent. Crude was off 56 cents at $123.68
a barrel but still up 9 percent this month.
"There are research reports out there suggesting an oil
price of $200 a barrel is possible, and the prospect of such
prices is driving the oils -- a fall of 50 cents is not
material," said a trader.
(Reporting by Sitaraman Shankar; editing by Sue Thomas)
