Feb. 6 (Bloomberg) -- The risk of companies defaulting rose for the second day on concern the U.S. economic slowdown is sapping growth in Europe and Asia.

The Markit CDX North America Investment Grade Index, a gauge of default risk linked to 125 companies in the U.S. and Canada, rose 2.5 basis points to 120 basis points in New York, according to Deutsche Bank AG. Benchmarks in Europe and Asia also rose, with a credit-default swap index in Japan soaring the most in one day after the country's broadest indicator of future growth signaled economic expansion will slow.

U.S. credit markets are trading ``like we're in the middle of the worst recession we've seen in a very, very long time,'' Goldman Sachs Group Inc. Chief Financial Officer David Viniar said at an investor conference today.

Consumer confidence in the U.K. is at the lowest in almost four years, mortgage lender Nationwide Building Society said today, fueling concern that a spending slowdown will crimp corporate earnings. In the U.S., where rising mortgage defaults and a freeze in some areas of credit markets are causing banks to tighten their lending standards, the Institute for Supply Management reported yesterday that service industries shrank the most since the last recession in 2001.

Credit-default swaps tied to General Motors Corp., the biggest automaker, rose 37 basis points to 832 basis points, the most in four weeks, according to CMA Datavision in London.

Contracts on GMAC LLC, the automobile and mortgage lender formerly owned by GM, rose 15 basis points to 828 basis points. The Detroit-based company yesterday posted a $724 million fourth- quarter loss as more than one of every 10 homeowners fell behind on their mortgage payments.

Repay Debt

Credit-default swaps are financial instruments based on bonds and loans that are used to speculate on a company's ability to repay debt. They pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements. A rise indicates worsening perceptions of credit quality; a decline, the opposite.

In Europe, the Markit iTraxx Crossover Index of 50 companies with mostly high-risk, high-yield credit ratings climbed 6 basis points to 510, according to JPMorgan Chase & Co. The Markit iTraxx Europe index jumped 2.25 basis points to 88.5, close to the record 92.25 on Jan. 22, JPMorgan prices show.

The Markit iTraxx Japan index of credit-default swaps soared the most in one day to 77.5 basis points from 70.

The CDX investment-grade index, the benchmark for North America, reached a record of 127 basis points on Jan. 22.

`No Decoupling'

``There is no decoupling from the U.S.,'' said Willem Sels, head of credit strategy at Dresdner Kleinwort in London. ``We are seeing spreading of weakness from the manufacturing sector to the services sector. That is critical for prospects of going into recession.''

A basis point on a credit-default swap contract protecting $10 million of debt from default for five years is equivalent to $1,000 a year.

Credit-default swaps on BHP Billiton Ltd., the world's largest mining company, climbed 21 basis points to 105, according to CMA Datavision. The Melbourne-based company is planning the world's biggest loan at $55 billion to finance its hostile bid for rival Rio Tinto Group.

Contracts on Frankfurt-based Deutsche Bank AG rose 5 basis points to 81 on concern that Germany's biggest lender may fall short of Chief Executive Officer Josef Ackermann's profit goal for 2008. The bank will earn 7.29 billion euros ($10.7 billion) before taxes this year, according to the median estimate of 10 analysts surveyed by Bloomberg, 13 percent less than a target of announced by Ackermann in October 2006.

Services Pace

The Institute for Supply Management non-manufacturing index fell in January to 41.9 from 54.4 the previous month, compared with economist estimates for a drop to 53. Europe's service industries grew at the weakest pace in more than four years last month, Royal Bank of Scotland Group Plc's services index showed yesterday.

``It is difficult to overstate how absolutely disastrous'' the figures are,'' Paul Mortimer-Lee, head of Market Economics at BNP Paribas SA, said in a note to investors today. The European Central Bank's view that growth will remain steady ``seems increasingly out of touch with reality,'' the note said.

A gauge of investor confidence in the U.S. high-yield, high- risk loan market fell to the lowest since it started trading Oct. 3. The LCDX Series 9, which falls as sentiment worsens, dropped 0.2 point to 92.15, according to Goldman Sachs.

To contact the reporter on this story: Abigail Moses in London Amoses5@bloomberg.net

Last Updated: February 6, 2008 17:38 EST