Shares are heading south rapidly after an unexpected drop in US service sector figures. The Institute of Supply Management said its index of non-manufacturing had plunged to 41.9 in January from 54.4 the month before. Analysts had been expecting a figure of around 53. Anything below 50 indicates recession.
And that fear has spooked the market. The FTSE 100 is now down 124 points to 5902.2, and Wall Street is forecast to open sharply lower.
Rob Carnell of ING said: "We do not normally pay too much attention to the non-manufacturing ISM. But the decline in this survey is so dramatic this month, that it definitely warrants a response.
"If this survey is telling us anything, it is that current spending by US households has weakened substantially, hinting at some very weak retail sales figures next week.
"It is also worth bearing in mind that in terms of employment and output, the
non-manufacturing sector dwarfs the manufacturing sector, so is a more worrying
development that more than offsets last week's good manufacturing news.
"The Fed might want to move rates in smaller steps at future meetings, but if the macro environment is deteriorating as fast and as far as this survey suggests, then markets may not allow them that luxury."
Back on this side of the pond, property groups are lower after HSBC moved to underweight on all the sector's companies.
HSBC said: "We downgrade Land Securities (target price: 1,565p, from 1,850p), Brixton (target price: 275p, from 425p) and SEGRO (target price: 450p, from 580p) from overweight, and Hammerson (target price: 765p, from 1,230p) and British Land (target price: 945p, from 1,160p) from neutral. We reiterate our underweight on Liberty International (target price: 750p, from 960p)."
Among the few risers in the FTSE 100 is Cadbury Schweppes, up 1p to 568p after an upgrade from JP Morgan.
