By Mike Dolan
LONDON, Feb 5 (Reuters) - Stock markets slipped again on
Tuesday on concerns the six-month-old credit and banking crisis
was hitting U.S. consumers and European service sector firms.
The chill of a looming U.S. recession, slower world growth
and its impact on company earnings, particularly those dependent
on household spending, returned to global markets as recent
optimism over fresh merger and acquisition activity faded.
European shares followed Asia bourses lower, both taking
their cue from Monday losses of about one percent on Wall Street
as U.S. credit card firms and banks were downgraded and a U.S.
Federal Reserve survey showed the credit squeeze tightening.
The early European session was dampened further by a series
of monthly surveys showing service sector firms across the
continent registering their gloomiest outlook for years in
January and well below economists' forecasts.
The purchasing managers' surveys showed the German service
sector contracting for the first time in 4-1/2 years, while
overall euro zone services growth decelerated sharply, sending
the euro lower and boosting the price of low-risk government
bonds.
"We've got a hit to disposable income which is keeping
consumption on the low side and we've got weaker exports. The
result is quite an explosive cocktail," Jacques Cailloux, chief
euro area economist at RBS, said of the German survey.
The FTSEurofirst 300 index <> fell 0.8 percent on the
day. The MSCI main world equity index <.MIWD00000PUS> was down
0.6 percent by 0925 GMT.
Share markets in Tokyo, Hong Kong and Sydney fell between
0.8-1.3 percent. MSCI's measure of Asian stocks excluding Japan
<.MIAPJ0000PUS> was down 0.5 percent.
S&P futures <SPc1> were down slightly on the day, indicating
a lower start on Wall Street later.
"We had a nice recovery last week. But we're still in the
midst of a major credit crisis," said David Buik of Cantor Index.
"As we see with these banks, capital bases are eroded which
makes conditions for credit very difficult."
MONEY'S TOO TIGHT
Downgrades to financial institutions such as American
Express <AXP.N>, combined with news of slower-than-expected U.S.
factory orders, hurt other economically sensitive sectors such
as home builders and retailers on Wall Street on Monday.
The credit crisis has raised the cost of credit and prompted
the Federal Reserve to cut U.S. interest rates several times.
Despite that action, banks in the United States tightened
their lending standards and terms for businesses and consumers
alike amid a deteriorating economic outlook, the Fed's January
senior loan officer survey showed on Monday.
Japan's Nikkei index <> closed down 0.8 percent, with
Honda Motor Co Ltd <7267.T> under pressure after downgrades of
U.S. credit card firms fuelled recession fears.
Camera maker Olympus Corp <7733.T> fell almost 14 percent
after it issued a weaker outlook.
"Ordinary investors can't wipe off the image that if the
U.S. economy slows, Japanese exporters will be hit," said Fujio
Ando, a senior managing director at Chibagin Asset Management.
Hong Kong's Hang Seng <> fell 1.5 percent, while
Singapore's Straits Times <.FTSTI> slid 1.8 percent. But Seoul's
KOSPI index <> rose 0.4 percent, with investors picking up
some beaten down stocks after the index plunged 14.4 percent in
January, the worst monthly performance since October 2000.
Elsewhere, the Australian dollar <AUD=D4> was supported by
an expected hike in interest rates to an 11-year high and signs
of further rate rises to come. []
Oil dipped below $90 <CLc1> a barrel following news that
some ships had managed to pass through into the Houston area in
the United States after dense sea fog lifted briefly. The area
is a key refining centre.
Platinum <XPT=> spiked to another record high above $1,800
an ounce before easing back to trade at $1,780 as supply
concerns persisted in main producer South Africa, also lifting
the price of palladium.
Spot gold <XAU=> traded at $902.50/903.50 an ounce.
(Additional reporting by Louise Heavens, Dominic Lau and Paul
Carrel, editing by Mike Peacock)
