NEW YORK: Mounting concerns that the U.S. economy is slipping into a recession and that financial companies will report more write-downs depressed stocks in Europe and the United States on Friday.

Economic growth faces the additional threat of the euros gains to an all-time high against the dollar.

U.S. consumer spending, which accounts for more than two-thirds of the countrys gross domestic product, was flat in January for the second month in a row, when adjusted for inflation, the Commerce Department said. Other reports showed a decline in consumer confidence and diminished business activity in the U.S. heartland, the Midwest.

On an absolute level, Americans spent more last month, as spending outlays increased 0.4 percent after rising 0.3 percent in December.

But the products they bought were more expensive, too. Prices are rising rapidly; in January, they were up 3.7 percent in January compared with those a year ago, the fastest rate of growth in more than two years.

“Consumers are spending more dollars, but the extra spending is being wiped out by higher prices,” Nigel Gault, an economist at Global Insight in Lexington, Massachusetts, wrote in a research note.

Investors absorbed the economic data and pushed stocks lower, egged on by negative earnings news from American International Group, the worlds biggest insurer, and other companies.

The Dow Jones industrial average was down more than 200 points, or 1.7 percent, at midday. The Standard Poors 500-stock index and the Nasdaq composite registered similar percentage declines. Across Europe, the major indices all closed down more than 1 percent. (Page 18)

A day after reporting its largest-ever quarterly loss, at $5.3 billion, AIG said Friday that the subprime crisis had thrown it into “uncharted waters” that were likely to remain choppy through 2008.

During a conference call, the chief executive, Martin Sullivan, did not rule out further write-downs and losses but said the crisis that led to the fourth-quarter loss was not expected to be material in the long run.

Also Friday, the billionaire Wilbur Ross said he had agreed to invest up to $1 billion in Assured Guaranty, sidelining big bond insurers like Ambac Financial Group in favor of a rival that has largely avoided the credit problems plaguing the industry. Ambacs shares plummeted. Confidence weakens in Europe

European confidence in the economy fell more than economists forecast in February on concern that soaring food and energy costs would keep inflation at record levels even as the euros strength threatens to slow growth, Bloomberg News reported.

An index of executive and consumer sentiment in the euro area declined to 100.1, the lowest level since November 2005, from 101.7 in January, the European Commission said Friday. Separate reports showed that energy and food inflation accelerated last month and unemployment stayed at a record low.

Food and crude oil prices rose to record highs this month. That has pushed up inflation and prevented the European Central Bank from cutting interest rates at a time when Europes economic expansion is cooling and the euros strength makes exports less competitive. The euro climbed as high as $1.5239 early Friday before sinking back slightly.

UK

LSE was up 1.73 to 17.51… third quarter revenues up 15% pro-forma posted third quarter revenue of 167.90 million, +87% (pro-forma +15%, +13% CER). Notes nine months revenue rose 47% to 371 million. The company says average daily order book cash equities trading for the combined UK
and Italian markets grew 56% to 916,000. Adds integration is making good progress and is confident of a good outcome for the current financial year.

BIFFA was down 0.06 to 3.19… the company prepared to accept offer at 3.50 Hg Pooled has dropped out of the bidding for the company but Montagu Private Equity has said it is still interested in pursuing a cash offer for the company Montagu has agreed to work together with Global Infrastructure Partners towards making an offer at 3.50 per share. Shareholders would retain the interim dividend of 2.3p. the company says it would be prepared to recommend an offer by the potential offerors at this level.

SCOTTISH & NEWCASTLE was up 0.19 to 7.54… Bid deadline extended 24 hours Shares recover after early weakness as the company announces it has agreed to a 24 hour extension to its discussions with Heineken and Carlsberg. The consortium has reaffirmed it plans to offer 8.0 per share. The stock fell in morning trade, amid concerns that Carlsberg might walk out at the last minute, despite saying it did not expect to have any problems financing its share of the takeover.

CABLE & WIRELESS was up 0.03 to 1.59… Expects to meet EBITDA target this year the company says it is well on its way to delivering EBITDA targets. Expects fiscal 2007/08 EBITDA to be between 585 million and 610 million, up between 19% and 24% year-over-year. Confirms intention to recommend a fiscal dividend of 7.5p per share, representing growth of 28%. France

SOC GEN («www.businessweek.com») was down €3.27 to €75.81… Falls sharply as trade resumes - Trading in the company shares opened sharply lower at 11:05 GMT, following a delay. the company announced this morning it has uncovered fraud carried out by one of its traders that will have a €4.9 billion negative impact. It also announces €2.05 billion in write-downs related to market turmoil. the company intends to launch a capital increase to raise €5.5 billion. Forecasts fiscal 2007 profit of €600-800 million. the company says its board rejected a proposal from chairman and CEO Daniel Bouton to resign.

AXA («www.businessweek.com») was up €2.29 to €24.30… Chinese insurers may eye Euro players - FT - Ping An Insurance, China’s second-largest insurer, is raising almost US$22 billion in the country’s biggest share sale to help fund its aggressive foreign acquisition strategy, the FT writes. The company says targets Prudential of the UK
. Citing an analyst at Oriel Securities, the article says AXA, ING and Aegon, could also prove interesting to Chinese insurers.

PERNOD RICARD was up €6.83 to €70.76… Strong second quarter sales/Cheuvreux upgrades - the company ’s first half07/08 consolidated net sales increased by 5.9% to €3.713 billion. The company says this resulted from: 1) 10.1% organic growth, 2) a 2.5% negative fx impact, primarily due to the loss in value of the US$, 3) a 1.5% negative group structure impact (disposal of Rich & Rare and end of co-packing for Fortune Brands). The company says second quarter07/08 consolidated net sales rose 5.2% to EUR 2.157 billion, better than expected, with organic growth at +9.1%. the company now aims for fiscal 2007/08 growth in operating profit, on a like-for-like basis, of about +12%, compared to c.+10% previously. Cheuvreux upgrades to outperform from underperform with €76 target. See Broker Views & News - France. GERMANY

SIEMENS («www.businessweek.com») was up €2.05 to €84.

The England spinner Ashley Giles today announced his retirement from cricket due to a persistent hip injury. The 34-year-old has become resigned to his fate after more than a year of problems and today took his surgeon’s advice to call it a day.

Giles claimed 143 wickets in 54 Tests and hit a brilliant 59, his highest score for England, to help secure the Ashes at The Oval two years ago.

“Following guidance from my hip surgeon, Dr Marc Philippon, I am very sorry to announce that I am retiring from all forms of cricket with immediate effect,” said Giles. “I had hoped to make a full recovery and return to playing over the next few months but the advice I have received means that there is no chance of me returning to cricket at any level.

“I would have liked to have left cricket at the very top, still playing the game that I have always loved, and whether it be on the village green or Test arena. But I have no regrets. I will always have great memories of being part of a fantastic Warwickshire and England dressing room. I feel lucky to have travelled the world playing a game with my mates and hugely privileged to have played alongside and against some of the greatest cricketers to grace the game.

“It has been a huge honour to play for my country and to play a part in one of the most successful periods in its cricketing history. I dreamt of playing cricket for England and winning the Ashes as a child and so to be part of that magical summer of 2005 was truly a dream realised.”

Giles’s contribution to that triumph was rewarded with an MBE alongside the rest of the side in that year’s New Year’s Honours list, and he played in the opening two Tests in Pakistan that November before his hip problems flared up. He recovered sufficiently to be controversially selected for the opening two Tests of last winter’s Ashes series ahead of Monty Panesar. But after returning home early from Australia for family reasons, he broke down again and has now had three operations in the last 18 months.

“Ashley’s retirement is very sad news and everyone in the England dressing room will miss his professionalism and, of course, his sense of humour,” said the England skipper Michael Vaughan. “In my view, Ashley has to be one of the most underrated cricketers ever to pull on an England shirt. He was a key member of the England Test side which won six successive Test series and I know how much his team-mates valued his contributions to our success.

“What also stands out for me is his strength of character. He went through difficult periods earlier in his career where he had long-term injuries but his determination to recover from them and regain his international place is an object lesson, not just to other cricketers but to any professional sportsman.”

Rob Smyth on why «blogs.guardian.co.uk»