US and European stocks fall amid signs of deteriorating economies

US stocks lost ground for a third day. Bloomberg reports:

U.S. stocks fell, extending the worst quarterly slump since 2002, as J.C. Penney Co. forecast weaker sales and concern grew that further writedowns may jeopardize banks' access to capital...

The Standard & Poor's 500 Index, which swung between gains and losses at least 10 times, ended down 10.54 points, or 0.8 percent, at 1,315.22 and lost 1.1 percent in the week. The Dow Jones Industrial Average declined 86.06, or 0.7 percent, to 12,216.4. The Nasdaq Composite Index decreased 19.65, or 0.9 percent, to 2,261.18. Five stocks fell for every two that rose on the New York Stock Exchange...

Shares also slumped after the Commerce Department said spending by U.S. consumers rose at the slowest pace in more than a year in February, a sign the economy may be in recession. The 0.1 percent advance in spending followed a 0.4 percent gain in January.

The Reuters/University of Michigan index of consumer sentiment decreased to 69.5 from 70.8 in February. The measure is the lowest reading since February 1992 and compares with a preliminary report of 70.5 released March 14.

European stocks also fell yesterday, the FTSEurofirst 300 index losing 0.5 percent to close at 1,265.47, although it was up 3.2 percent for the week.

In the meantime, the ECB isn't relaxing. Bloomberg reports the latest ECB initiative.

The European Central Bank, struggling to ease gridlock in credit markets, will lend six-month money for the first time even as policy makers warned higher interest rates may be needed to combat inflation.

The ECB said it will auction 50 billion euros ($79 billion) in emergency six-month funds to support "the normalization of the functioning of the euro money market." At the same time, council members Axel Weber and Juergen Stark said Europe's economy is coping with the jump in global credit costs and the central bank may need to raise its benchmark interest rate to fight inflation.

Yesterday's data illustrate the ECB's dilemma.

German inflation accelerated more than economists forecast in March, climbing to 3.2 percent from 2.9 percent in February, the country's statistics office said today...

European retail sales fell in March and French consumer confidence dropped to a record low, separate reports showed today.

The BoE has not quite shown the same degree of hawkishness, perhaps understandable from yesterday's reports. From Bloomberg:

U.K. house prices rose at the slowest pace in more than a decade in March and consumer confidence was the lowest since 1993, adding to evidence the economy is on course for its weakest performance since the end of the last recession...

The economy expanded 2.8 percent in the fourth quarter from a year earlier, slower than a previously estimated 2.9 percent, as consumer spending growth was revised lower and government expenditure fell, the Office for National Statistics said in London today. The economy grew 0.6 percent on the quarter.