Volatile day sees US stocks slide

The Dow Jones industrial average, which had suffered its biggest one day points drop in three years on Wednesday, closed down 0.69% at 11,128.29.

And the tech-heavy Nasdaq suffered its longest losing streak in 12 years.

European markets sharply fluctuated too , as the FTSE 100 fell before closing down slightly, France's Cac was also behind, and Germany's Dax ahead 0.24%.

The initial falls came after US inflation figures were higher than expected on Wednesday, fuelling fears of further interest rate rises.

"There is a lot of global uncertainty on where interest rates are going and where commodity prices are going, which makes it a difficult market to predict"
Hilary Cook at Barclays Stockbrokers

Q&A: World market turmoil

In Wednesday's trading, the London FTSE fell 170 points, with the US Dow Jones index losing more than 210 points.

Asian markets followed suit the next day, with exchanges from Japan to Australia losing up to 3%.

On Thursday, after a see-saw day, the three main US markets closed down. As well as the Dow, the Nasdaq closed down 0.7% at 2,180.3 - marking its worst streak since 1994 - and the S&P closed down 0.67% at 1261.81.

Uncertainty

Some analysts argue that the falls are an overdue market correction.

"There is a lot of global uncertainty on where interest rates are going and where commodity prices are going, which makes it a difficult market to predict," said Hilary Cook at Barclays Stockbrokers.

"But after the falls we have seen we would expect some consolidation, although it is going to be a bumpy ride."

Traders will be concerned about eurozone interest rates after higher-than-expected eurozone inflation figures were released on Wednesday.

Higher inflation could make the chance of a rise from the current 2.5% level more likely.

And if the euro continues to rise in value against the dollar, this could make it tougher for European companies to export, as they become less competitive, economists argue.

Despite the risks from high and volatile oil prices and exchange rate movements, EU Economic and Monetary Affairs Commissioner Joaquin Almunia was optimistic about global growth and European recovery.

The markets will be closely watching to see what US Treasury Secretary John Snow has to say when testifying before the Senate on international economic and exchange rate policies.