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| European stocks hit by rate fears | European stocks hit by rate fears |
| (10 minutes later) | |
| European stock indexes have remained under pressure on concerns that the region's central banks will not follow the US in slashing interest rates. | 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. | 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. | 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. | Stock indexes are set to be highly volatile in coming weeks, they warned. |
| Speaking to the BBC, billionaire investor George Soros said it was going to be difficult for the UK and US to avoid a recession. | |
| 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%. |
| Japan's Nikkei 225 earlier closed up 2%, and Hong Kong's Hang Seng added 8%. | Japan's Nikkei 225 earlier closed up 2%, and Hong Kong's Hang Seng added 8%. |
| Caution rules | Caution rules |
| Despite a late rally in stock prices on Tuesday and the 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. |
| Bank of England governor Mervyn King said that the UK faces its toughest economic challenges since 1997. | Bank of England governor Mervyn King said that the UK faces its toughest economic challenges since 1997. |
| Even so, and with 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". | |
| European Central Bank (ECB) President Jean-Claude Trichet also highlighted the risk of inflation during a speech to the European Parliament on Wednesday. | |
| Mr Trichet said that price growth was still the ECB's main concern, and this outweighed the risks of slowing economic growth. | |
| "In all circumstances, but even more particularly in demanding times of significant market correction and turbulences, it is the responsibility of the central bank to solidly anchor inflation expectations to avoid additional volatility in already highly volatile markets," he explained. |