* Dismal Target, Walmart results bring growth worries
* Nestle, Diageo, Unilever slip between 2.7% and 4.5%
* HomeServe jumps on $5 billion offer
* Valneva jumps on EU's nod for COVID-19 vaccine
May 19 (Reuters) - European shares slumped 1.5% on Thursday,
stretching declines to the second straight session, as dismal
results from big U.S. retailers underlined the hit from surging
inflation on the world's biggest economy.
Tracking U.S. peers, European retailers fell nearly
2% and were the biggest drags on the pan-European STOXX 600
index, which extended declines after a 1% slide on
Losses were broad based, with all major sub-sectors trading
in the red.
U.S. stock futures pointed to a fresh sell-off after Target
Corp's quarterly profit halved and Walmart cut
its profit view as they struggle with rising fuel and freight
costs, while consumers shift their spending away from big-ticket
purchases to essentials.
European retailers such as Tesco and Sainsbury
had also warned last month of a hit to full-year
profits from rising prices.
Nestle, Tesco, Diageo and Unilever
fell between 4.5% and 5.5% on Thursday.
"The fact that earnings are being compressed for
mid-to-lower tier consumers just tells you inflation is having
an impact ... on Europe probably more so than the U.S. because
wage expectations are not as good," said Sebastien Galy, senior
macro strategist at Nordea Asset Management.
"It's reviving the stories of stagflation, particularly so
in the euro zone."
Along with the ongoing stimulus reduction by central banks
and concerns about the fallout from the Ukraine war, investors
fled to the safety of bonds.
"The end of earnings season might provide some brief respite
from all the negativity, but with more high inflation readings
and interest rate hikes to come stocks are going to suffer a lot
more bad news," said Chris Beauchamp, chief market analyst at
online trading platform IG.
The STOXX 600 is down 12% for the year as China's COVID-19
worries added to global recession fears. But as cases drop,
hopes of recovery have offered some respite to investors.
Among other stocks, HomeServe rallied 10.2% after
Canada's Brookfield Asset Management said it had
agreed to buy the British home repair services firm for 4.08
billion pounds ($5.04 billion).
France's Valneva surged 16.9% after the European
Union's medicine regulator accepted the company's filing of a
marketing authorization application for its inactivated COVID-19
Britain's Royal Mail fell 12.4% after the company's
2021-22 profit just missed market expectations.
First-quarter earnings for companies listed on STOXX 600 are
expected to increase 41.5% from a year ago, according to
Refinitiv data. As of Tuesday, 68.4% of results from companies
had exceeded market expectations. In a typical quarter 52% beat
(Reporting by Susan Mathew and Shreyashi Sanyal in Bengaluru
Editing by Arun Koyyur and Mark Potter)