Oil Prices Take Toll on Stock Markets MARKETPLACE By Bloomberg

By Andreas Hippin

European stock markets dropped for a third straight session Wednesday as crude oil prices rose to their highest levels in six months and U.S. data showed further signs of weak economic growth.

Negative data this week has included reports of falling U.S. home sales and prices, a slide in consumer confidence, and disappointing durable goods orders. Stocks extended declines after Ben Bernanke, chairman of the Federal Reserve, said in Congressional testimony that inflation remained “uncomfortably high,” while “uncertainties around the outlook” had increased in recent weeks.

“The main concern is that the U.S. economy is slowing further,” said Holger Boschke, global chief investment officer at Dresdner Bank in Frankfurt.

Companies that are heavily reliant on U.S. sales were again weak, led down by Rio Tinto Group, SAP and AXA. Airlines, which are vulnerable to sharp swings in jet fuel prices, lost ground for a second day. Air France-KLM, the largest European airline operator, and British Airways both fell more than 1 percent.

“A higher oil price could weigh on the economy and corporate profits,” especially in the airline industry, said Peter Brandle, a fund manager at Swisscanto Asset Management in Zurich.

Volkswagen dropped for a third day after Porsche formally made its low-ball takeover offer. Volkswagen shares fell 2.70 to 110.90. Porsche made an official filing to buy all of Volkswagen at 100.92 per share. The stock has lost 6 percent since Porsche announced its offer price.

Hennes & Mauritz dropped sharply after the Swedish retailer posted an 11 percent rise in first quarter earnings, disappointing analysts who had expected more. The Dow Jones Stoxx 600 European stock index lost 2.36 points to 370.10 by the close in London. The Stoxx 50 fell 23.92 points to 3,678.10 while the Euro Stoxx 50, a measure for the 13 countries sharing the euro, dipped 25.41 points to 4,128.20.

National benchmarks dropped in 17 of the 18 markets in Western Europe. In France the CAC 40 share index sank 34.37 points to 5,552.69. The Germany DAX index slid 41.45 points to 6,816.89, while in London the FTSE 100 slipped 25.40 points to 6,267.20.

Among miners, slowing growth prospects knocked Rio Tinto down 56 pence to l28.28 while Anglo American dropped 36 pence to l26.02.

SAP, the leading maker of business-management software, fell 21 euro cents to 33.68 while the French insurer Axa dropped 45 cents to 31.41.

“We have had a triple whammy today of higher oil prices, Fed Chairman Bernanke’s talk of economic uncertainty and weak U.S. durable goods data,” said Martin Slaney, a trader at GFT Global Markets in London. “This afternoon’s developments have now started to take their toll” on stocks.

Oil prices rose toward $65 on concern that a dispute over Iran’s detention of British military personnel could escalate, disrupting supplies from the Middle East. *

Oil companies gain

“If tensions with Iran escalate further, profit margins of airlines, gas companies and chemical makers dependant on oil would be depressed,” said Heino Ruland, head of research at Wolfgang Steubing in Frankfurt.

Oil companies were the main beneficiaries with the Stoxx 600 oil and gas index rising 1.5 percent to a one-month high. Royal Dutch Shell, the largest European oil company, and BP, the second- largest, were among the gainers, while Petroleum Geo-Services, a major provider of oil field mapping services, rose 8.75 Norwegian kroner to 156 kroner.

Siemens, the leading European engineering company, fell following the arrest of Johannes Feldmayer, a Siemens board member, on Tuesday in an investigation of bribery allegations.

Feldmayer, the most senior manager at Siemens to be arrested in the investigation, asked to be “temporarily” suspended from his position.

Iberia advanced after a British newspaper reported that Texas Pacific Group was considering a 4 billion bid for the Spanish flag carrier. The report said British Airways, which already owns 10 percent of Iberia, might also make a bid.

Tiscali gained on a newspaper report that Wind Telecomunicazioni and BT Group might be preparing a bid for the Italian Internet provider.

“The company and shareholder Renato Soru deny that negotiations with Wind are under way,” Tiscali said in a stock-exchange statement.

(c) 2007 International Herald Tribune. Provided by ProQuest Information and Learning. All rights Reserved.