The FTSE 100 index of leading British shares was down 60.59 points, or 1.5 per cent, at 4,109.37, while Germany's DAX was 22.30 points, or 0.5 per cent, lower at 4,544.94. The CAC-40 in France was 41.79, or 1.3 per cent, lower at 3,124.86.

Earlier, the three European indexes were higher as the European Central Bank, the Bank of England and Sweden's Riksbank all cut interest rates aggressively, but Wall Street's expected losses pushed them lower.

Dow Jones industrial average futures dropped 132 points, or 1.5 per cent, to 8,447 while the broader Standard & Poor's 500 futures fell 13.40, or 1.5 per cent, to 855.10, amid concerns about the consumer spending in the US.

The first November sales reports in the US showed deep declines. Costco Wholesale Corp., usually a strong performer, said it had a drop in same-store sales twice as large as analysts had forecast. Other retailers that saw declines in same-store sales were Bon-Ton Stores Inc., Limited Brands Inc. and Pacific Sunwear of California Inc.

Overall, sales are expected to be grim, especially after initial reports indicated that Thanksgiving holiday weekend results weren't strong enough to save the month for retailers.

Investors are on edge ahead of Friday's closely watched US non-farm payrolls data for November. The consensus in the markets is that employers reduced jobs by 320,000 during the month but a raft of dismal economic data this week has fueled speculation that the job reductions may well be much higher.

These concerns about the state of the US economy more than outweighed any relief the markets received by the three interest rate cuts in European.

While the Bank of England slashed its benchmark rate by a full percentage point to a 57-year low of 2.00 per cent, the European Central Bank cut its key rate by 0.75 percentage points to 2.50 per cent. Sweden's Riksbank outdid them both with a staggering 1.75 per cent reduction, which took its main interest rate to 2.00 per cent.

'Any beneficial effect from lower borrowing costs is offset by the feeling that the economic situation is not going to turn around any time soon,' said Mr Neil Mackinnon, chief economist at ECU Group.

Earlier, Asian stocks were mixed at the close, with Japan's Nikkei 225 average down 79.86 points, or 1 per cent, to 7,924.24 as automakers continued to slide amid signs of slumping demand for new vehicles in the United States and Toyota said it was briefly suspending production at three plants in Japan later this month.

Investors were also nervous about the fate of the US automakers trying to persuade skeptical lawmakers to save their troubled industry with US$34 billion (S$51.8 billion) in emergency aid.

Hong Kong's Hang Seng index dipped 0.6 per cent to 13,509 points, but mainland China's Shanghai Composite index rose 1.8 per cent to 2001.5 on news that a government fund had bought shares in a major bank.

Markets in India, Singapore and Indonesia rose, but those in Taiwan, the Philippines and Malaysia fell.

Elsewhere, oil prices fell to their lowest level in nearly four years as investors expect a gloomy global economy to hurt crude demand. Light, sweet crude for January delivery was down 70 cents to US$46.09 a barrel in electronic trading on the New York Mercantile Exchange.

In currencies, the interest rate decisions on Europe caused extreme volatility. The euro was down 0.7 per cent at $1.2619 while the pound was down 1.1 percent at $1.4606, having earlier fallen to $1.4467, its lowest level against the dollar in over six and a half years.

Meanwhile, the dollar was down 0.6 percent against the Japanese yen at 92.76 yen. -- AP