European Stocks Fall as Inflation in U.S. Climbs; Daimler Falls

European stocks dropped for a second day after U.S. consumer prices rose more than economists forecast, fueling concern inflation and higher borrowing costs remain a threat in the world's biggest economy.

Nestle SA, the world's largest food company, German carmaker DaimlerChrysler AG and Michelin & Cie. led a slide by companies that rely on sales in Europe's biggest trading partner.

``This puts the idea of a status quo on U.S. interest rates in jeopardy,'' said Vafa Ahmadi, a fund manager at CPR Asset Management in Paris, which oversees $26 billion. ``That's the main concern for the stock market.''

Higher inflation in the U.S. could put pressure on Federal Reserve Chairman Ben S. Bernanke to boost rates, undercutting a rally that sent the Dow Jones Stoxx 600 Index to a six-year high and dimming the outlook for earnings growth.

Anglo American Plc, the world's second largest mining company, had the biggest loss in more than a month after profit missed analysts' estimates. Heineken NV tumbled as the Dutch brewer said earnings may grow less than some analysts expect.

The Dow Jones Stoxx 600 Index fell 0.7 percent to 378.46 at the close in London. The Stoxx 50 slipped 0.9 percent and the Euro Stoxx 50, a measure for the 13 nations sharing the euro, declined 0.4 percent.

The U.S. consumer price index increased 0.2 percent in January after rising 0.4 percent in December, the Labor Department said today in Washington. Prices excluding food and energy rose 0.3 percent, the most since June of last year.

Inflation Disappointment

Fed policy makers, seeking to subdue inflation without hurting growth, held the benchmark interest-rate target unchanged at 5.25 percent the past five meetings.

``It's obviously a bit of a disappointment on inflation,'' said Peter Jarvis, the London-based director of European equities at F&C Asset Management, which oversees about $230 billion. ``The market is taking the consumer price data as an excuse for taking home some profit after the good run we've had.''

National benchmarks fell in 16 of the 18 western European markets. France's CAC 40 lost 0.3 percent. The U.K.'s FTSE slipped 0.9 percent while Germany's DAX dropped 0.6 percent.

Nestle, which makes 34 percent of its sales in the Americas, dropped 1.4 percent to 464 Swiss francs. DaimlerChrysler, which has 45 percent of sales in the U.S., declined 2.8 percent to 53.94 euros.

Shares of Michelin, Europe's biggest tiremaker, lost 1.2 percent to 82.1 euros. The company makes 36 percent of its sales in North America.

Missed Estimates

Anglo American slumped 2.5 percent to 2,536 pence. Profit at the world's second-biggest mining company rose 76 percent to a record, led by platinum and the industrial metals needed by China. Earnings before one-time items missed analysts' estimates.

The company also announced a $3 billion share buy-back that lags behind a $10 billion program announced by rival BHP Billiton, the world's biggest mining company.

Heineken tumbled 3.9 percent to 37.81 euros. The brewer whose beer is sold in more than 170 countries said it expects profit to grow as little as 10 percent in 2007, below some analysts' estimates. Second-half profit rose 87 percent.

Royal Numico NV retreated 3.3 percent to 39.91 euros. Europe's largest maker of baby food said fourth-quarter profit declined 41 percent because of a change in Dutch tax laws.

About a third of the 29 Dow Jones Stoxx 50 Index companies that have reported results for the fourth quarter have fallen short of projections, including Swiss drugmaker Novartis AG and Rio Tinto Group, the world's third-biggest mining company.

``Earnings remain good as a whole but there are fewer positive earnings surprises than last year,'' said Emmanuel Soupre, who helps manage $20 billion at Neuflize Gestion in Paris. ``There's fragility because of that.''

Price Fixing

ThyssenKrupp AG slid 1.1 percent to 38.96 euros after the European Commission fined elevator makers including the German company a record 994.2 million euros for price-fixing.

ThyssenKrupp received a 479.7 million euro fine, the biggest penalty against an individual company involved in a cartel. Klaus Pepperhoff, a spokesman for ThyssenKrupp in Dusseldorf, wasn't immediately available to comment.

Alliance & Leicester Plc surged 7.8 percent to 1,149 pence, the biggest gain on the Stoxx 600.

The U.K.'s seventh-biggest lender said 2006 profit gained 11 percent to 432.2 million pounds ($844.5 million) as it made more money from mortgages. That beat the 390.5 million-pound average estimate of 11 analysts surveyed by Bloomberg.

ABN Amro Holding NV jumped 6.1 percent to 27.5 euros. The biggest Dutch bank is ``significantly'' undervalued and should be broken up, according to TCI Fund Management, a U.K. hedge fund that two years ago led the ouster of Deutsche Boerse AG's top executives.

Imperial Tobacco

Imperial Tobacco Group Plc, the maker of Davidoff cigarettes, rose 1.9 percent to 2,220 pence after El Economista said Altria Group Inc. sought the support of Spain's Altadis SA to make a bid for the company.

Tomasso Di Giovanni, a spokesman for Altria's Philip Morris International unit, declined to comment on the report, as did spokesmen Miguel Angel Martin of Altadis and Alex Parsons of Imperial Tobacco.

Metrovacesa SA, Spain's largest real-estate developer, plunged 8.4 percent to 107.95 euros after the main owners ended a battle for control by agreeing to split the company in two. Gecina SA, its French unit, rose 3.9 percent to 147.98 euros.

Societe Television Francaise 1 advanced 4 percent to 26.19 euros after the owner of France's most-watched television station said it expects TF1 channel advertising to rise as much as 8 percent in 2007.

source:www.bloomberg.com