Markets continue to fall

The sell-down in stock markets continued yesterday.

	5 March close	Points change	Percent change
S&P 500	1,374.12	-13.05	-0.9
Nikkei 225	16,642.25	-575.68	-3.3
FTSE 100	6,058.70	-57.50	-0.9

And the yen strengthened to nearly 115 yen to a US dollar as the yen carry trade continued to unwound.

On the economic data front, the news was mixed.

Bloomberg reports that Japanese capital spending accelerated in the fourth quarter.

Investment surged 16.8 percent in the three months ended Dec. 31, the Ministry of Finance said in a quarterly survey of companies today, the fastest increase since the government started tracking the figure in 2002. Profits rose 8.3 percent from a year earlier.

Spending on factories and equipment by companies including Sharp Corp. contributed to about half of Japan's growth in 2006, offsetting weak consumer spending. The pace of growth means the fourth quarter's gross domestic product figures may be revised higher, helping to validate last month's decision by the Bank of Japan to raise interest rates.

But services slowed in Europe:

Expansion in European service industries from banking to telecommunications, the biggest part of the economy, slowed in February after a sales-tax increase damped consumer spending in Germany.
Royal Bank of Scotland Group Plc's services index fell to 57.5 from 57.9 in January. A reading above 50 in the index, based on a survey of purchasing managers by NTC Economics Ltd., indicates expansion...

Growth in U.K. service industries slowed in February, with an index based on a survey of 700 companies falling to 57.4 from 59.2, another industry report showed today.

...as well as in the US:

Service industries in the U.S. grew last month at the slowest pace in almost four years, suggesting the economic slowdown may be spreading beyond housing and manufacturing.

The Institute for Supply Management's index of non- manufacturing businesses, which make up 90 percent of the economy, fell to a lower-than-forecast 54.3 after a January level of 59, the Tempe, Arizona-based group said. Readings above 50 mean that services are continuing to expand.

For the meantime, though, markets will be primarily driven by sentiment, which remains fragile. Any rebound in markets could be reversed very quickly.