World Stocks Down Ahead of European Rate Decisions

World stock markets fell Thursday after the U.S. Federal Reserve cautioned about the wider economic impact of rising unemployment. Investors awaited interest rate decisions in Europe later in the day.

The Fed indicated Wednesday that it would keep its benchmark interest rate at near zero percent "for an extended period" even though it conceded that economic activity had picked up.

The Fed warned household spending would remain "constrained by ongoing job losses, sluggish income growth, lower housing wealth and tight credit."

Similar statements are expected from the European Central Bank and the Bank of England later when they announce their latest interest rate decisions later. Both banks are expected to keep borrowing costs on hold for some time.

The Bank of England, however, may expand the amount of money it pumps into the British economy, which unexpectedly stayed in recession in the third quarter.

As a result, analysts said the FTSE 100 index of leading British shares could be in for a more volatile day than its counterparts in Europe.

"With numbers in the range of 25 to 75 billion pounds ($41 billion to $124 billion) being thrown around, regardless of what is announced it should prove volatile for the markets," said Brian Dolan, an analyst at Forex.com.

Ahead of the Bank of England decision expected at 1200 GMT, the FTSE was down 40.80 points, or 0.8 percent, at 5,067.09. Meanwhile, Germany's DAX was 34.53 points, or 0.6 percent, lower to 5,409.70 while the CAC-40 in France was 21.03 points, or 0.6 percent, lower at 3,649.30. The ECB decision is due at 1245 GMT.

Once the central banks have left the stage, investors will start to turn their attention to Friday's crucial U.S. nonfarm payrolls report for October. The jobs data often set the stock market tone for a week or two.

At the moment, analysts expect payrolls to have fallen by around 175,000 during the month, while the unemployment rate is expected to tick up further to, or just below, 10 percent.