Japan and the leading economies of Europe yesterday rebuffed US calls for a global economic stimulus package even as new figures suggested that the US might be in recession already.
The data, showing that the US service sector contracted for the first time in almost five years, provoked sharp falls in shares in Europe, while in the US the S&P500 fell 3.2 per cent at close of trading. In Dublin, the Iseq fell by 4.25 per cent.
It became clear yesterday that a weekend meeting of the group of seven leading economies would not agree on a concerted fiscal stimulus, nor on a regulatory package to address the turmoil in credit markets.
David McCormick, the US Treasury's undersecretary for international affairs, said it was "especially important" that other countries "take prudent steps to strengthen their economies' demand components".
His call received short-shrift from the finance ministries of Japan, Germany and the UK, which indicated they had no immediate intention of following the US fiscal stimulus package.
Activity in the US services industry, as measured by the Institute for Supply Management's (ISM) non-manufacturing business activity index, appeared to contract in January, adding to gloominess about the economic outlook. The ISM index fell from a seasonally adjusted level of 54.4 in December to 41.9 in January. The figure was much worse than expectations of 53.
Among the biggest losers in Dublin yesterday was multi-national building materials group CRH, which has a substantial US business. It saw its share price drop to €24.775 from an opening quote of €26.90, a fall of 8.6 per cent compared with 4.25 per cent for the market as a whole. The fall cut its total value to €13.5 billion from €14.7 billion.
Stockbrokers said the main reason was bad news from a rival in the US, where CRH earns about half of its business. Martin Marietta, the second-biggest supplier of sand and gravel in the US, reported that net profits in the fourth quarter of 2007 dropped 9.6 per cent to $56.5 million (€38.6 million), well below market expectations.
The Carolina-based group blamed bad weather and increased fuel costs for the poor performance. Investors reacted by forcing its share price down by 8.3 per cent to $108.32, its worst performance in 14 years.
Along with negative news from the US, Goodbody Stockbrokers analyst Robert Eason said the Bush administration was proposing to spend $39.4 billion on highway construction, $1.8 billion less than planned. He estimates one-third of CRH's US business, which contributed €953 million to operating profits in 2006, comes from federal road building.
