LONDON, May 22: European stock exchanges dropped heavily in morning trade on Monday, dragged down by mining and metals stocks and extending last week’s plunge caused by concern about higher inflation.

The falls came as the New York Stock Exchange (NYSE) announced it had offered to buy the pan-European Euronext exchange to create a group with a value of 16 billion euros ($21 billion).

The merger of the two groups would create the world’s leading stock market, at nearly three times the size of its nearest rival.

In Monday trade, London’s FTSE 100 index of leading shares tumbled 1.65 per cent to 5,564.20 points, Frankfurt’s DAX 30 shed 1.44 per cent to 5,590.82 points and in Paris the CAC 40 index lost 1.32 per cent to 4,879.33.

The DJ Euro Stoxx 50 index of leading eurozone shares declined 1.43 per cent to 3,573.29 points.

The euro stood at 1.2764 dollars.

Global share prices fell strongly last week on investor concerns over rising inflation, uncertainty over interest rates and a weak US dollar.

Prior to the current turbulence, European stock exchanges had traded close to recent five-year peaks against a backdrop of positive economic data, company results and merger and acquisition news.

The FTSE sank 4.3 per cent or 254.7 points last week.

Hilary Cook, director of investment strategy at Barclays Stockbrokers, said that lower commodity prices were driving the FTSE falls on Monday because the proportion of shares tied up in the sector made the FTSE a “quasi-commodities index”.

She said: Everyone assumed it was going to bounce back but unfortunately commodity prices are in free-fall. The market is in an ‘all news is bad news’ kind of mood.

Wall Street had posted modest gains Friday as investors scooped up beaten-down shares following a brutal series of declines in recent days.

In London, mining stock prices dived amid falling metals prices. Antofagasta plunged 8.34 per cent to 1,869 pence, Kazakhmys tumbled 7.98 per cent to 963 pence and Xstrata shed 6.99 per cent to 1,797 pence.

In Paris, steel group Arcelor gave up 7.46 per cent to 32.24 euros, a day after its board postponed its response to an improved takover bid from its rival Mittal Steel.

Not all European stocks struggled on Monday, however. In London, the Alliance and Leicester bank saw its share price soar 6.46 per cent to 1,187 pence after Credit Agricole, France’s biggest bank, confirmed an interest in possibly bidding for its British peer.—AFP