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European stocks hit by US worries European stocks hit by rate fears
(30 minutes later)
European stock indexes have remained under pressure on concerns that the US Federal Reserve's biggest rate cut for 25 years will not ease economic woes. European stock indexes have remained under pressure on concerns that the region's central banks will not follow the US in slashing interest rates.
On Tuesday, the US Federal Reserve made its biggest rate cut for 25 years in an effort to avert a full-blown recession.
However, the European Central Bank hinted it would not follow suit, and the Bank of England was unlikely to accelerate rate cuts, analysts said.
Stock indexes are set to be highly volatile in coming weeks, they warned.
The UK's FTSE 100 index was 44 points, or 0.5%, lower at 5,696, erasing earlier gains. Germany's Dax lost 0.4%, while France's Cac added 0.6%.The UK's FTSE 100 index was 44 points, or 0.5%, lower at 5,696, erasing earlier gains. Germany's Dax lost 0.4%, while France's Cac added 0.6%.
Some analysts have questioned whether the Fed's move goes far enough. Japan's Nikkei 225 earlier closed up 2%, and Hong Kong's Hang Seng added 8%.
Bank of England governor Mervyn King said that the UK faces its toughest economic challenges since 1997. Caution rules
Speaking to the BBC, billionaire investor George Soros said it was going to be difficult for the UK and US to avoid a recession.
Despite a late rally in stock prices on Tuesday and a positive session in Asia on Wednesday, investors were still being cautious.Despite a late rally in stock prices on Tuesday and a positive session in Asia on Wednesday, investors were still being cautious.
Gains were also being limited by pre-market electronic trading in US shares, which indicated that stock indexes were set to fall when the New York Stock Exchange opens later.Gains were also being limited by pre-market electronic trading in US shares, which indicated that stock indexes were set to fall when the New York Stock Exchange opens later.
"Caution still rules the long-term picture," said Markus Steinbeis of Pioneer Investments."Caution still rules the long-term picture," said Markus Steinbeis of Pioneer Investments.
Many analysts are predicting that stock indexes will remain volatile in coming weeks. MARKETS VIDEO ROUND-UP href="http://www.bbc.co.uk/mediaselector/check/player/nol/newsid_7200000/newsid_7204100?redirect=7204112.stm&news=1&bbram=1&bbwm=1&nbwm=1&nbram=1&asb=1" onClick="javascript:newsi.utils.av.launch({el:this});return false;">Effects on US market href="http://www.bbc.co.uk/mediaselector/check/player/nol/newsid_7200000/newsid_7204100?redirect=7204158.stm&news=1&bbwm=1&bbram=1&nbram=1&nbwm=1&asb=1" onClick="javascript:newsi.utils.av.launch({el:this});return false;">Asian markets
Japan's Nikkei 225 earlier closed up 2%, and Hong Kong's Hang Seng added 8%. Bank of England governor Mervyn King said that the UK faces its toughest economic challenges since 1997.
Even so, while the Bank is widely tipped to reduce rates to 5.25% from 5.5% next month, analysts are saying that more extensive cuts are unlikely. This is because the Bank said the risk of inflation had "worsened markedly".
Speaking to the BBC, billionaire investor George Soros said it was going to be difficult for the UK and US to avoid a recession.