(Updates prices, adds Wall Street outlook, ZEW, UK data)
By Natsuko Waki
LONDON, April 15 (Reuters) - European shares fell back and
Wall Street was set for a weaker open on Tuesday as more
evidence of economic downturn in Europe and concerns about
first-quarter earnings made investors nervous.
Oil stormed to all-time peaks due to supply concerns in
Mexico while other commodities such as rice and gold firmed.
Sterling hit a fresh 11-1/2 year low on a trade-weighted
basis and record lows versus the euro after data showing steady
inflation and slowing housing markets raised expectations the
Bank of England might cut interest rates again this year.
Firmer energy and commodity prices reflect resilience of
emerging economies at a time when developed country economies
are suffering from the effects of the credit crisis which has
spooked global financial markets since August.
Evidence is piling up that major economies are feeling the
chill. In Britain, surveys showed slowing housing markets and
falling retail sales. German investor sentiment deteriorated in
April.
"The view that the United States (is) only in a temporary
phase of weakening and will soon move towards potential growth
is barely tenable any more. That is playing a role. The
environment in the euro zone is also weakening," said Peter
Meister, economist at BHF Bank.
The FTSEurofirst 300 index <> was down 0.2 percent
while the MSCI main world equity index <.MIWD00000PUS> was
steady on the day, having hit a two-week low on Monday.
U.S. stock futures were down 0.3 percent <SPc1>, indicating
a weaker open on Wall Street.
Sterling fell to all-time lows of 80.65 pence per euro
<EURGBP=> after British data. The dollar was steady against
major currencies <.DXY>.
In the money market, stress is building up in medium-term
euro funding, with London interbank offered rates for
three-month euro hitting a fresh 3-1/2 month high of 4.76125
percent <LIBOR>.
U.S. light crude rose as high as $112.82 a barrel <CLc1>.
U.S. rice futures <RRN8> rose to an all-time high, extending
this year's increase to more than 60 percent, while corn <CK8>
kept within sight of a recent record. Gold also extended gains
<XAU=> to $933.40 an ounce.
European credit spreads moved a touch tighter. The iTraxx
Crossover index <ITCRS5EA=GFI>, most-widely watched indicator
for European credit market sentiment, hit 527 basis points.
Emerging sovereign spreads <11EMJ> were steady while
emerging stocks <.MSCIEF> were up 0.1 percent.
The June Bund future <FGBLM8> was steady on the day.
CHILLING EVIDENCE
Eight months after the initial wave of the U.S. subprime
mortgage fallout hit financial markets, there is growing
evidence that tight liquidity and credit conditions are now
hitting the real economy hard.
The Royal Institution of Chartered Surveyors said British
surveyors reported the most widespread fall in house prices in
the 30-year history of their survey. The Department for
Communities and Local Government said annual British house price
inflation eased to a 19-month low of 6.7 percent in February.
The British Retail Consortium said like-for-like retail
sales fell in March for the first time in two years, and at the
sharpest pace in nearly three years.
"With no end in sight to the bad news emanating from the UK
housing market and the growing downside risks to the domestic
economy, we see little respite for sterling in the coming
weeks," JP Morgan said in a note to clients.
A closely watched survey by the ZEW research institute
showed German investor sentiment deteriorated for the first time
in three months in April.
Investors are looking to a series of earnings data due this
week to see how corporates performed in the first three months
of this year.
U.S. firms reporting their Q1 results later include Intel
<INTC.O>, Washington Mutual <WM.N> and Northern Trust <NTRS.O>.
An expected quarterly loss from Wachovia Corp <WB.N> on
Monday raised concerns about the health of banks hit by their
investment in risky U.S. subprime mortgages.
However, earnings results from banks -- many of them pretty
weak -- have so far helped reassure investors that they are
scrubbing their books clean, putting the credit crunch behind
them.
(Editing by Gerrard Raven)
