(11:00): Hopes for a rebound on the FTSE 100 after Wednesday's shares rout have faded, after an initial rally petered out.
(Noon): Hopes for a rebound on the FTSE 100 after Wednesday's shares rout have faded, after an initial rally petered out.
After opening higher by 1%, gains went into reverse, with the index now trading down by nearly 2%.
After opening higher by 1%, gains went into reverse, with the index now trading down by 1.7%, or 110 points, at 6,101.11.
In France, the CAC-40 dropped by 3.5% while Germany's Dax fell by 2%.
In France, the CAC-40 dropped by 2% while Germany's Dax fell by 1.6%.
London's blue chip index saw its heaviest one-day fall in 16 months on Wednesday, dropping 2.8% or 181 points to 6,211.64.
London's blue chip index saw its heaviest one-day fall in 16 months on Wednesday, dropping by 2.8%.
That marked its lowest point since July last year and wiped £46bn off shares.
That marked its lowest point since July last year and wiped £46bn off shares.
The FTSE 100 fell 1.9% below Wednesday's close to 6092.43 after the official eurozone inflation figure for September was left unrevised at 0.3%.
The biggest loser for the second day in a row was drugs firm Shire, which lost 22% on Wednesday on the potential collapse of a £32bn takeover by US rival AbbVie. It was down by a further 9% on Thursday after the company confirmed it was no longer interested.
The Eurostat agency said there are now five countries with annual deflation - Greece, Italy, Spain, Slovenia and Slovakia.
The biggest loser for the second day in a row was drugs firm Shire, which lost 22% on Wednesday on the potential collapse of a £32bn takeover by US rival AbbVie. It was down by a further 7% on Thursday after the company confirmed it was no longer interested.
'Monetary morphine'
The market's muted performance followed another torrid session on Wall Street and gloom on Asian markets overnight, amid continuing worries over the global economy.
The market's muted performance followed another torrid session on Wall Street and gloom on Asian markets overnight, amid continuing worries over the global economy.
US retail sales for September fell 0.3% on the previous month and other key data on manufacturing cemented a gloomy picture, prompting steep falls on Wall Street.
US retail sales for September fell 0.3% on the previous month and other key data on manufacturing cemented a gloomy picture, prompting steep falls on Wall Street.
Japan's blue chip index Nikkei 225 closed down 2.2% at 14,738.38 - a four-and-a-half-month low.
Hong Kong shares were down 0.5% as the Hang Seng Index fell to 23,013.86.
The Shanghai Composite fell 0.5% after data showed that the rate of inflation in September fell, adding to evidence of a slowdown in the Chinese economy.
Michael Hewson, chief market analyst at CMC Markets, said the end of monetary stimulus in the United States had provided a reality check for markets.
He said: "As the monetary morphine has started to wear off the patient has come to realise that a lot of the old problems still remain, and yesterday's poor US data helped trigger a rather extreme reaction in not only the stock markets but bond markets too, as complacent investors rushed to hedge themselves.
"In essence, investors are asking the question with respect to the recent recovery about whether this is as good as it gets, which rather explains the slump in the oil price, bond yields and stock markets."
