European shares fell for the first time in three days, gilts declined and the pound strengthened after Bank of England policy makers said inflation may be higher than forecast. The yen weakened for a second day. The Stoxx Europe (SXXP) 600 Index fell 0.3 percent at 11:05 a.m. in London. U.K. two-year note yields climbed to a four-week high and the pound jumped 0.4 percent against the dollar. The yen retreated against all 16 of its most-traded peers. Standard & Poor’s 500 Index futures declined less than 0.1 percent. Shares of Intel Corp. (INTC) and International Business Machines Corp. dropped in German trading. The Shanghai Composite Index (SHCOMP) jumped 2 percent on speculation China will ease monetary policy. Inflation may be more of a danger than previously expected and the Bank of England should refrain from further stimulus, according to the minutes of a meeting of its Monetary Policy Committee released today. Nineteen companies in the S&P 500 (SPX) are scheduled to release earnings today, including BlackRock Inc. and Halliburton Co. Spain will auction 3.3 percent two-year notes and 5.85 percent 10-year debt tomorrow. “Earnings are exceeding what were considerably marked down estimates, but guidance still seems biased to the downside,� Barry Knapp, the head of equity strategy at Barclays Capital in New York, wrote in a report. “The good news is that our economists expect decent performance in the U.S., a bottoming in southern Europe and China and some re-acceleration in developing world growth in the second half of 2012.� Salmon Farmer The Stoxx 600’s drop came after yesterday’s 2 percent advance. Marine Harvest ASA declined 4.8 percent in Oslo trading as the world’s largest salmon farmer said earnings retreated. Heineken NV (HEIA), the world’s third-biggest brewer, climbed 3.1 percent after reporting first-quarter sales that beat estimates. The S&P 500 futures rose 1.6 percent yesterday, the most in a month. Yahoo! Inc. gained 3 percent in German trading after reporting first-quarter sales that topped estimates. Intel Corp. slid 2.5 percent as the world’s largest semiconductor maker forecast a second-quarter gross margin that was lower than some analysts predicted. IBM fell 1.2 percent as the biggest computer-services provider had revenue that trailed estimates. Companies in the S&P 500 have topped analysts’ projections by an average of 4.6 percent since the U.S. earnings season unofficially began April 10, data compiled by Bloomberg show. Spanish Bonds The yield on the 10-year gilt climbed three basis points to 2.13 percent, after rising to as much as 2.17 percent, the most since April 5. The two-year note yield advanced two basis points to 0.45 percent, after reaching 0.49 percent, the highest since March 21. The yield on the Spanish 10-year bond fell eight basis points, dropping for the second straight day. The extra yield investors demand to hold Spanish 10-year bonds instead of similar maturity German bunds, Europe’s benchmark securities, fell 7 basis points. German two-year notes were little changed after the nation sold 4.2 billion euros ($5.5 billion) of the securities today at a record low yield of 0.14 percent. The yen slid 0.7 percent against the dollar and declined 0.4 percent versus the euro. The pound climbed against all 16 major peers, jumping 0.4 percent to $1.5982. The Swedish krona strengthened against 14 of its 16 major peers after the nation’s central bank kept its main rate unchanged amid signs the largest Nordic economy will avoid a recession. The Shanghai Composite Index jumped 2 percent, the most since Feb. 8. The Hang Seng China Enterprises Index (HSCEI) of Chinese shares in Hong Kong gained 1.1 percent. The MSCI Emerging Markets Index (MXEF) rose 0.3 percent, the biggest increase since April 12. The Micex Index added 0.2 percent in Russia and the ISE National 100 Index (XU100) advanced 0.6 percent in Turkey. China Recommendation The Chinese central bank should lower the reserve- requirement ratio and adjust the loan-to-deposit ratio to increase banks’ lending capacity and meet credit demand in the economy, Wang Jun, a researcher with the China Center for International Economic Exchanges. His comments at a Beijing seminar were posted on www.china.com.cn, a website controlled by the State Council Information Office. Copper advanced 0.2 percent to $8,065 a metric ton in London. Oil erased gains and was up less than 0.1 percent at $104.23 a barrel in New York. French banks led an increase in the cost of insuring against default on European financial debt. Credit-default swaps on BNP Paribas SA jumped 16 basis points to 259 and Societe Generale SA climbed 20 to 344, both the highest in three months. The Markit iTraxx Financial Index rose four basis points to 248. To contact the reporters on this story: Lynn Thomasson in Hong Kong at lthomasson@bloomberg.net; Claudia Carpenter in London at ccarpenter2@bloomberg.net To contact the editor responsible for this story: Stuart Wallace at swallace6@bloomberg.net

Source