US and European stocks fell, with the UK's FTSE 100 index slumping as much as 3.9% at one point, on fears that key global economies will enter recession.

On Tuesday, the US Federal Reserve made its biggest rate cut for 25 years to stoke up growth and bolster markets.

However, worries persist that the move may have come too late, as many firms have already reported lower profits and a worsening business environment.

Analysts said that stock markets would probably be volatile in coming weeks.

On Tuesday, the European Central Bank hinted it would not follow the Fed by slashing rates, and analysts said the Bank of England was unlikely to accelerate rate cuts.

Speaking to the BBC, billionaire investor George Soros said it was going to be difficult for the UK and US to avoid a recession, even after the Fed cut its main interest rate to 3.5% from 4.25%.

The worry is that slower economic growth will hurt corporate earnings, and stocks fell across all sectors on Wednesday. Banks, oil companies and technology firms were amongst the biggest decliners.

"The uncertainty about corporate earnings growth in 2008 has risen, not only in the financial sector," said Matthias Schellenberg, managing director at ING Investment Management.

"The markets are expecting a flood of profit warnings in the next few months."

Market movers

In New York, the main Dow Jones index dropped 1.45%, with the technology-dominated Nasdaq sliding about 2.70%.

The UK's FTSE 100 index finished a nerve-wracking session 131 points, or 2.2%, lower at 5,609.3, erasing the gains it made on Tuesday.

Germany's Dax lost 4.9% at 6,439.21, while France's Cac 40 was down 4.3% at 4,636.76.

So far this year, the FTSE 100 has lost more than 13% of its value, wiping about £225bn off the total value of the companies listed on the index.

Germany Dax's index has been one of the worst hit in Europe, down almost 20% this year.

Werner Bader, a stock strategist at LBBW bank, put the falls down to the fact that German firms make most of their earnings overseas, particularly in the US.

"Dax companies are more exposed to the global economy because of their strong exports," he said.

FULL STORY: CLICK HERE