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US recession fears intensify, further rate cuts expected

Recession worries surged, slamming financial markets, amid signs that service businesses may be stumbling in both the US and Europe, The Wall Street Journal reported.

In the US, a key barometer of the strength of the service sector dropped to its lowest level since October 2001, and suggested those businesses are now contracting. In Europe, a similar indicator fell to a four-year low, said the report.

The readings fanned fears on Wall Street that the US is about to tip into recession, if it hasn't already done so, particularly startling analysts who had viewed services as the nation's last bastion of economic growth.

On Tuesday, the Institute for Supply Management said its index of non-manufacturing business activity, which is based on a survey of purchasing managers in service industries, fell to 41.9 in January from 54.4 in December. That was the sharpest decline in the survey's 10-year history.

In Europe, a service-sector index compiled by the Royal Bank of Scotland and NTC Economics in London dropped to 50.6 from 53.1, reflecting particular weakness in financial-services businesses. Adding to the gloom was the weakness of retail sales in the 15 countries that share the euro. Euro-zone sales declined for the third straight month in December and were down 2% on the year.

The data reinforced expectations that the Federal Reserve will cut its target for the benchmark federal-funds rate, at which banks lend to each other overnight, to 2.5% at its March 18 policy meeting from the current 3%, according to the report, noting a cut before then is also possible. (Xinhua)