US economy stalls

6th February 2008, Comments 0 comments

Stock markets suffered yet another session of selling chaos on Tuesday amid growing suspicions among analysts and investors that recent efforts to prevent the US economy from sinking into a recession may amount to too little too late.

6 February 2008

MADRID - Stock markets suffered yet another session of selling chaos on Tuesday amid growing suspicions among analysts and investors that recent efforts to prevent the US economy from sinking into a recession may amount to too little too late.

The publication of data showing a much sharper than expected contraction in the US services sector in January triggered the widespread selling after it appeared to confirm pessimists' worse fears.

The Institute for Supply Management reported that its index of service sector business activity declined to 44.6 in January from a revised reading of 54.4 in December. A reading of less than 50 points indicates contraction in the all-important industry and a sure sign that the economy is heading into recession or could be in one already. Economists had been expecting a slight slowdown but had still forecast growth, with a median estimate for the index of 53. It is the first time since 2003 that the index has been below 50.

Similarly glum news in the form of poor consumer confidence and industrial production data in Spain added to Spanish investors' list of woes, sending the Ibex 35 plunging 5.19 percent, the blue-chip laden index's second biggest one-day fall this year. It ended the session at 12,814.70 points, well below the psychological support level of 13,000.

Banks and constructors were the hardest hit, reflecting deepening worries about the health of the real estate market and the financial system and casting further doubt on the ability of European economies to weather the fallout from the credit crunch that began in the US last summer.

Market turnover amounted to EUR 6.726 billion, of which EUR 5.381 billion was accounted for by open operations.

[Copyright EL PAÍS / RAFAEL VIDAL 2008]

Subject: Spanish news

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