(Recasts with latest price moves, adds Wall Street outlook)
By Natsuko Waki
LONDON, May 13 (Reuters) - European shares and sterling fell
on Tuesday after news of falling profits at Europe's banks and
UK data showing a jump in inflation, a weakening housing market
and soft retail sales reinforced the gloom about the economy.
Oil fell further away from Monday's record peak, while a
firmer dollar pushed gold and platinum lower.
Soaring food and fuel bills pushed up Britain's inflation
rate by its biggest amount in nearly six years, denting
expectations of growth-boosting interest rate cuts.
At the same time, surveys cemented the view that the UK
economy was losing momentum. House prices fell in every region
of Britain in April with surveyors reporting the widest margin
of decline in at least 30 years. Retail sales values fell for a
second consecutive month in April.
"The concern is we are now about to enter a period of high
inflation and much slower growth," said Jeremy Batstone-Carr,
head of private client research at Charles Stanley.
"But obviously, by not cutting interest rates any more, the
risk is that the UK economy goes through a period of even slower
growth and possibly flirts with recession."
Sterling fell half a percent to $1.9480 <GBP=>, approaching
Monday's 2-1/2 month low.
The FTSEurofirst 300 index <> erased early gains to
stand down 0.4 percent while the MSCI main world equity index
<.MIWD00000PUS> fell 0.1 percent, having hit a four-month peak
last week. Sterling <=GBP> fell half a percent on the trade
weighted index.
U.S. stock futures were down 0.3 percent <SPc1>, indicating
a weaker open on Wall Street.
Asian shares <.MIAPJ0000PUS> rose 0.6 percent, while Chinese
shares fell 1.8 percent after Monday's earthquake in southwest
China where the death toll has reached nearly 12,000.
BANKS HIT
The banking sector was one of the biggest losers in Europe,
falling 0.8 percent <.SX7P>.
Societe Generale <SOGN.PA> reported a 23.4 percent fall in
first-quarter net profit, although it was above the market
consensus.
Credit Agricole <CAGR.PA> fell more than 6 percent after it
announced a 5.9 billion euros rights issue to shore up its
capital after further writedowns at its Calyon investment bank.
Alliance & Leicester <ALLL.L> fell nearly 11 percent after
it took a 192 million pound hit to profits from toxic assets.
"Likely reflected in the more sluggish performance of banks
over the past week, questions remain around the medium to
long-term impact on bank profitability, taking into account new
funding conditions, the likely reduction of leverage and the
outlook for the European credit cycle," Goldman Sachs said in a
note to clients.
Technology shares were in the spotlight after news
Hewlett-Packard Co <HPQ.N> is in talks to buy technology
outsourcing company Electronic Data Systems Corp <EDS.N> for
$12-13 billion.
Emerging sovereign spreads <11EMJ> tightened 1 basis point
while emerging stocks <.MSCIEF> rose 0.6 percent.
The dollar was up 0.3 percent against major currencies
<.DXY>, while the June Bund future <FGBLM8> fell 14 ticks.
U.S. light crude oil <CLc1> fell 0.5 percent to $123.55 a
barrel, edging further away from Monday's record above $126.
Gold <XAU=> fell to $876.00 an ounce.
(Additional reporting by Rebekah Curtis)
