European stock markets closed sharply lower on Thursday for the second day in a row, stricken by gloomy economic forecasts from the European Central Bank and weighed down by a slump on Wall Street.
London's FTSE 100 blue chip index closed down 2.50 percent at 5,362.10 points, having risen slightly in the morning.
In Paris, the CAC 40 leading index shed 3.22 percent to 4,304.01 points while in Frankfurt the DAX index lost 2.91 percent to 6,279.57 points.
On Wednesday, both London and Paris had shed more than 2.0 percent, while Frankfurt had finished down 0.78 percent.
"The overall mood turned early in the afternoon session with the release of some US data," said dealer David Fineberg of CMC Markets, referring to a weak payroll survey and higher weekly jobless claims.
The DJ Euro Stoxx 50 index of leading eurozone shares sank 2.79 percent to stand at 3,274.82 on Thursday.
US shares tumbled as a glum economic outlook heightened investor fears despite stronger-than-expected reports on the service sector and labour productivity.
The Dow Jones Industrial Average sank 1.95 percent to 11,308.49 and the Nasdaq composite shed 1.87 percent to 2,290.13 at 1450 GMT, as losses accelerated in mid-morning trade.
The Standard & Poor's 500 broad-market index retreated 1.74 percent to 1,252.77.
Japanese share prices closed down 1.04 percent amid caution ahead of the release of US jobs figures, dealers said.
Heavy selling in London meanwhile followed a press conference by the European Central Bank (ECB) president Jean-Claude Trichet, who cut the central bank's projections for economic growth in the eurozone this year and next and increased forecasts for inflation.
"On the growth front, the ECB remains rightly cautious in buying too much from the recent oil drop," said Aurelio Maccario, chief eurozone economist at UniCredit Markets & Investment.
"In Jean-Claude Trichet we saw an increased awareness that we are headed toward tough times."
In Britain, more bad housing data added to already morose sentiment about the economy following a string of disappointing data releases and a flurry of recession warnings.
House prices in Britain fell by 10.9 percent in August compared with the same month a year earlier, the biggest drop in 25 years, home loan provider Halifax said Thursday in its monthly report.
Shares in British lenders promptly tumbled. HSBC lost 3.25 percent to 855 pence, Lloyds TSB 5.68 percent to 286.25 pence, and Barclays and HBOS shares each lost more than six percent.
Falling house prices expose banks to the risk of increased bad debt.
On the Paris exchange, energy giant Total's shares lost 2.14 percent to 14.28 euros on falling crude oil prices.
At rate-setting meeting on Thursday, the ECB and Bank of England (BoE) kept their key lending rates unchanged as expected at 4.25 percent and 5.00 percent respectively, as high inflation remained their key concern despite threats of recession.
In foreign exchange trade, the euro hit its lowest level against the US currency since December 21, sinking to 1.4326 dollars in afternoon trading in London.
Elsewhere in Europe, in Madrid the Ibex-35 fell 3.11 percent to 11,480.1 points, in Milan the SP/Mib lost 2.85 percent to 28,233 points, in Amsterdam the AEX lost 2.25 percent to 397.17 points and in Brussels the Bel 20 shed 3.13 percent to 3.066.15 points.
The Swiss SMI index lost 2.37 percent to 7,084.65 points.