Equity markets in London and Europe endured further heavy selling on Thursday following major losses in the US and across Asia as the economic gloom deepened.

Fears that recent financial rescue plans will not be enough to avert a deep and prolonged global recession ensured even some of the traditional safe havens like gold and Japan's yen currency were left exposed to losses.

Those stocks with the greatest exposure to slowing demand were the worst hit. Miners and metal and oil producers lost heavily for a second day as metals and crude prices slid on commodity exchanges. Retailers, luxury brands and leisure and travel stocks took a hit as rising unemployment and slowing business activity tightened consumer spending.

By late morning trade, most indices had come off their worst levels.In Europe, the FTSE Eurofirst 300 was 3 per cent lower at 875.31, after opening down 5 per cent. Germany's Xetra Dax lost 2.5 per cent to 4,740.23, paring an earlier 6.2 per cent fall. France's CAC 40 fell 3.8 per cent to 3,248.95 and in London, the FTSE 100 dropped 3.3 per cent to 3,944.8.

Overnight in New York, stocks had their worst day since the 1987 market crash after a run of dismal data that showed slowing retail sales and falling economic activity across the US.

Ben Bernanke, chairman of the US Federal Reserve, warned "broader economic recovery will not happen right away", even if bank rescue plans were successful. He added "marked slowdowns in consumer spending, business investment and the labour market" had occurred before the latest phase in the financial sector crisis.

The Dow Jones Industrial Average ended down 7.9 per cent and the S&P 500 off 9 per cent.

In Switzerland, the government took a 9 per cent stake in UBS, ploughing in SFr6bn of capital into the ailing bank, while the country's central bank said it would buy toxic assets worth up to $60bn. Its shares turned around opening losses and rose 3.7 per cent before sinking back to Wednesday's close of SFr20.20.

Credit Suisse said it would not need to accept government funds, and instead turned to a small group of large investors, which include sovereign wealth fund Qatar Holding, to raise SFr10bn. The shares were up 1.7 per cent to SFr46.7.

Elsewhere banks remained mired in losses. Belgo-Dutch Fortis plunged 13.8 per cent to €1.02, Anglo-Irish Bank fell 9 per cent to €2.05 while Bank of Ireland shed 11.6 per cent to €1.78.

Deutsche Postbank dropped 10.6 per cent to €20.15 on talk that Deutsche Bank's deal to acquire a controlling stake in Germany's biggest retail bank could fall through. Its parent company Deutsche Post fell 9.6 per cent to €10.5. Deutsche Bank slid 3.5 per cent to €32.73.

Finnish cellphone giant Nokia, fell 1.9 per cent to €11.56 after undershooting expectations with its third-quarter results. The shares initally dropped by more than 8 per cent but investors were consoled by the company's outlook for the cellphone market.

Nokia said it expected industry moble volumes to rise 10.5 per cent to 1.26 billion phones in 2008.

The miners and metals producers continued to fall sharply on fears of slowing global demand. Anglo American lost 4.3 per cent to £12.69 and Rio Tinto shed 5.6 per cent to £22.30. Paris-listed steelmaker ArcelorMittal shed 5.1 per cent to €20.81 while Germany's Salzgitter dropped 5.6 per cent to €47.36.

Oil stocks were similarly weak after crude prices fell below $70 a barrel. France's Total shed 6.1 per cent to €34.34, Britain's Royal Dutch Shell lost 4.3 per cent to £12.89 and Portugal's Galp Energia slid 9 per cent to €7.47 while Austria's OMV dived 10.5 per cent to €25.94.