By Blaise Robinson
PARIS, May 14 (Reuters) - European shares ended higher on
Wednesday as tame U.S. inflation data eased worries that the
U.S. Federal Reserve might have to raise interest rates to keep
inflation at bay, while mining stocks rose on fresh merger talk.
Airbus parent EADS <EAD.PA> rose 5.9 percent after reporting
stronger quarterly profits than expected and stuck to its
forecasts for the year despite fresh delays to its A380
superjumbo.
BNP Paribas <BNPP.PA> gained 4.9 percent after France's
biggest listed bank posted results that beat most expectations.
Also in the financial sector, Dutch financial services group
ING Groep <ING.AS> rose 3.9 percent after reporting first
quarter results with production above analysts' forecasts.
The FTSEurofirst 300 <> index of top European shares
ended 0.6 percent higher at 1,354.70 points, its highest close
in nearly a week.
Data showed on Wednesday that U.S. consumer prices rose a
smaller-than-expected 0.2 percent in April as energy prices held
steady. That was less than the 0.3 percent gain analysts polled
by Reuters were expecting after a 0.3 percent advance in March.
So-called core prices, which exclude volatile food and energy,
were up just 0.1 percent, half the increase analysts had
forecast.
"The pressure on the Fed seems to diminish, although it
might come back at some point. But for now, if they see the
chance to cut rates and avoid damage on the economy, they will
probably cut," said Arthur van Slooten, strategist at Societe
Generale, in Paris.
BHP Billiton <BLT.L> rose 4.9 percent, fuelled by
speculation that a state-controlled Chinese firm was building a
stake in the world's biggest mining company. Much of the
speculation centred on giant Chinese aluminium maker Chinalco,
already the largest shareholder in Rio Tinto <RIO.L>.
A Chinalco spokeswoman declined to comment.
Other miners gained ground, with Kazakhmys <KAZ.L> up 4.3
percent and Vedanta <VED.L> up 4.5 percent.
Belgian-French financial services group Dexia
<DEXI.BR><DEXI.PA> moved into the opposite direction, dropping
1.2 percent after posting quarterly results that came below
market expectations, citing U.S. mortgage-related losses.
UK WORRIES WEIGH ON STOCKS
Around Europe, UK's FTSE 100 index <> rose 0.07
percent, underperforming Germany's DAX index <>, which
gained 0.3 percent, and France's CAC 40 <>, up 1.1 percent,
as UK banks got hammered on concerns over rights issues and a
bleak economic prospect.
The Bank of England said on Wednesday the British economy
could shrink for a quarter or two and inflation may near 4
percent this year.
Bradford & Bingley <BB.L> shares sank 9.3 percent after the
lender unveiled a 300 million pound rights issue, just a month
after saying it had no plans to do so.
HBOS <HBOS.L> fell 3 percent and Barclays <BARC.L> lost 2.4
percent.
The FTSEurofirst 300 index has gained 1.2 percent so far in
May. That follows a 6 percent gain in April after relatively
strong corporate results soothed investors' worries over the
impact from a U.S. economic downturn on companies.
But analysts say concerns over earnings could resurface.
The proportion of companies that have missed expectations is
above the 2007 average and above last quarter's levels, Societe
Generale analysts said in a note, pointing out that forecast
downgrades have been rising.
"The level of downgrades in Europe and the U.S. is back to
the levels seen in Q1 2001 and Q1 2003," they wrote.
"Consensus estimates now call for year-on-year EPS (earnings
per share) growth of almost 8.9 percent for U.S. companies in
2008, down from expectations of a 15 percent rise at the start
of the year. The median forecast for EPS growth for European
companies is now just 4.8 percent".
