European shares fell to their lowest levels this year today amid fears further monetary tightening on both sides of the Atlantic will hurt the global economy.
The FTSEurofirst 300 index of top European shares was down 2.1 per cent at 1,262 points this morning - bringing to 10.4 per cent its dip in the past month - with markets in Paris, Amsterdam, Zurich, Brussels and Stockholm all falling to their lowest level for 2006. This followed big losses on Wall Street and Tokyo.
Investors worldwide fear US and European central banks will smother economic growth on the back of their monetary tightening drive.
Financial markets are on edge ahead of a European Central Bank (ECB) decision at 12.45pm Irish time. The ECB is expected to deliver a quarter-point rate rise to 2.75 per cent, coupled with tough talk on inflation to warn that further rise remain in store.
Some market players have bet the central bank could go as far as a half-point increase.
Elsewhere, fresh comments from a Federal Reserve official strengthened expectations that US interest rates will rise again later this month.
Atlanta Fed President Jack Guynn said last night that the US central bank would not let its guard down when it comes to containing price pressures, echoing Fed Chairman Ben Bernanke's remarks earlier in the week that vigilance was needed to keep inflation under control.
The Bank of England is also due to announce the results of its monetary policy committee meeting at noon, although it is widely expected to keep rates on hold for the 10th month running at 4.5 per cent.