US shares slide on weak data

A $300 tax rebate has helped keep consumers spending

US stock markets fell sharply on Tuesday after consumer confidence figures were unexpectedly weak.

The data threw cold water on hopes that the US downturn could be stabilising.

The blue-chip index of shares, the Dow Jones Industrial Average, shed 160 points or 1.5% to close the day at 10,222.

And the technology heavy Nasdaq index fell 2.5% or 47.4 points to 1,865.

The fears of US investors also sent shares tumbling around the world, with shares in France, Germany and the UK all ending the day in negative territory.

Interest rate hopes

The Conference Board's US consumer confidence index for August fell to 114.3, its lowest level in four months.

In July the index also slipped to 116.3, revised downwards from the original 116.5 and a fall of 1.4 points.

Most observers were expecting the index to rise this month, with a consensus of economists forecasting a gain to 117.

And the "Present Situation" Index - a measure of consumer views of the economic status right now - also fell, dropping to 145.8 in August from 151.3 in July.

The only upside of the figures is the likelihood that more interest rate cuts could be forthcoming.

Unemployment fears

The news immediately depressed equity markets, given the expectations of improvement.

This month's result is at the very least well above the recent low of 109.2 set in February this year, let alone the troughs set during the last US recession.

But the figures are especially worrying because of the prevalent belief that consumer spending - still relatively robust - would help the US to ride out the slowdown that has dogged it throughout 2001.

Observers hoped a $300-per-household tax rebate introduced by President George W Bush would encourage shoppers to open their purses still wider.

But according to the Conference Board, US consumers burdened with debt - the US population is, on average, spending about 6% more than it earns - are increasingly living in fear of getting fired.

The number of families saying jobs are hard to come by rose to 15.9% from 14.1%, according to the Board.

And there was also a rise in the proportion of those fearing that the economy will get worse rather than better.