LONDON - EUROPEAN stock markets traded down on Thursday after heavy sell-offs on Wall Street and Asia despite interest rate cuts across the continent, including a much bigger than anticipated reduction from the Bank of England.

The FTSE 100 index of leading British shares was down 167.72 points, or 3.7 per cent, at 4,363.01, while Germany's DAX was 211.66, or 4.1 per cent, lower at 4,955.21. France's CAC-40 was down 127.33 points, or 3.5 per cent, at 3,490.78.

Except for some volatility after the interest rate cuts from the Bank of England and the European Central Bank and an unscheduled reduction by the Swiss Central Bank, Europe's stock indexes were still more or less at the level they were before the decisions.

While the Bank of England slashed its benchmark rate by 1.5 percentage points to 3.00 per cent, its biggest cut since March 1981, the European Central Bank and the Swiss National Bank opted for more modest half-point reductions. The Czech Republic's central bank cut by three-quarters of a point.

The Bank of England's bigger than anticipated rate cut stoked expectations that the European Central Bank would be more aggressive than expected. Its decision to cut by only a half-percent disappointed investors looking for more aggressive action.

'The ECB rate cut came as a disappointment in the end after far more aggressive action from the Bank of England,' said Ms Jennifer McKeown, European economist at Capital Economics.

The failure of the FTSE to rally strongly in the wake of the Bank of England's aggressive interest rate cut indicated that the bank may have further reinforced fears about the length and depth of the recession in Britain.

'Traders are thinking, if we've really got to cut rates to 3 per cent, then how bad is it out there,' said Mr Mic Mills, senior trader at ETX Capital.

'Recessionary fears were bad before; they just got a whole lot worse,' he added.

Europe's indexes had already been lower in the wake of hefty losses on Wednesday on Wall Street and in Asia overnight as investors fretted about the global economy The Dow Jones industrial average fell 486.01, or 5.1 per cent, to 9,139.27, while the Standard & Poor's 500 index shed more than 5 per cent.

It's not expected to get much better later, with stock futures down. Dow futures were down 107 points, or 1.1 per cent, at 9,070, while S&P futures were 12.9 points, or 1.4 per cent, lower at 945.1.

The losses on Wall Street triggered a renewed bout of selling in Asia with Japan's Nikkei stock average down 6.5 per cent at 8,899.14, and Hong Kong's Hang Seng Index 7.1 per cent lower at 13,790.04.

Stocks around the world have enjoyed a strong rally over the last week or so, partly on relief that the US presidential election was coming to an end.

However, investors know that President-elect Barack Obama will have his work cut out to improve the US's immediate economic prospects and that Inauguration Day is still more than two months away.

Further proof of the scale of the downturn in the world's largest economy came Wednesday with the news that the US service sector contracted sharply in Oct as new orders and employment fell. The Institute for Supply Management, a trade group of purchasing executives, says the services sector index fell to 44.4 in Oct from 50.2 in Sept. Analysts had anticipated a far more modest drop.

Earlier, South Korea's benchmark Kospi index broke a five-session winning streak to dive 7.6 per cent. Markets in Singapore, Australia and mainland China also dropped sharply.

Meanwhile, oil prices slipped US$1.65 a barrel to US$63.65 ($94.44) a barrel.

Oil prices have fallen by about 56 percent since peaking at US$147.27 a barrel in mid-Jul.

The euro was 0.7 per cent lower at US$1.2878, while the dollar was unchanged at 98.19 yen. -- AP