European stocks fall early as oil rises; HSBC eyed

LONDON, Aug 4 (Reuters) – European shares fell in early trade on Monday as a higher oil price underscored inflation worries and financial stocks weakened ahead of results from the region's largest bank, HSBC.

At 0716 GMT, the pan-European FTSEurofirst 300 index fell 0.6 percent to 1,157.08 points.

Banks took the most points off the index, with UBS down 2.4 percent, BNP Paribas down 1.5 percent and Barclays off 1.7 percent.

Shares in Belgian-Dutch group Fortis fell 1.4 percent after rising in early trade. Its net profit halved in the second quarter on writedowns, and it said it would push forward with plans to improve its capital base.

HSBC is expected to report a first-half profit of just over $10 billion, down about $4 billion, based on the average of seven analysts' forecasts. Results are due around 0830 GMT.

"The bank reporting season in the United States was generally positive and hopefully European banks will not be as bad as expected — clearly results from industrial companies are not enough to support the market," said Thierry Lacraz, strategist at Pictet in Geneva.

Later in the week, investor focus shifts to rate decisions from the U.S. Federal Reserve, the European Central Bank and the Bank of England, who are all expected to stay on hold.

Lacraz said he did not expect any surprises from the three central banks.

"The economic situation is too weak now for big steps to be taken — negative economic surprises from the eurozone are the most common for the moment, which is a fact the ECB will have to keep in mind."

Oil rose 90 cents a barrel to just over $126 on concerns over Iran's nuclear activities, a tropical storm that has formed near the Gulf of Mexico and more violence in OPEC member Nigeria.

Oil groups advanced, with BP up 0.5 percent and Royal Dutch Shell up 0.9 percent.