LONDON -- European stocks dropped Thursday after the previous day's strong rally, as markets shrugged off central banks' interest rate cuts to record lows and China deflated investors' hope that the country will boost spending.
In European afternoon trading, Britain's FTSE 100 lost 2.3 percent at 3,563.59, Germany's DAX dived 2.7 percent to 3,787.63, and France's CAC 40 tumbled 2.2 percent to 2,617.69.
Chinese Premier Wen Jiabao said the government's stimulus plan would help the world's third-largest economy grow by 8 percent this year, but he stopped short of delivering the promise of new stimulus measures.
The hope that China would unveil more government spending was a major trigger for the stock markets' bounce Wednesday.
And in Europe Thursday, European and British central banks' decision to cut interest rates by a half percentage point to new record lows of 1.5 percent and 0.5 percent failed to cheer investors.
The Bank of England's sixth cut in as many months was overshadowed by its move to begin so-called quantitative easing, more colloquially known as "printing money," to expand the domestic money supply.
"There were no great surprises in the announcements of either the Bank of England or ECB," said Keith Bowman, an analyst at Hargreaves Lansdown Stockbrokers in London. "What's maybe left the market on a back foot today is simply hopes of a further Chinese fiscal package being dashed."
Wall Street was set to open lower after General Motors announced that its auditors have raised "substantial doubt" about its ability to continue operations, and that it may have to seek bankruptcy protection if it can't execute a huge restructuring plan. The troubled automaker has already received $13.4 billion in federal loans, and is seeking a total of $30 billion from the U.S. government.
Ahead of the market's opening, Dow Jones industrial average futures dropped 1.7 percent to 6,743. Standard & Poor's 500 index futures lost 1.8 percent to 696.60, and Nasdaq 100 index futures fell 2.5 percent to 1,090.50.
In other European trading news, shares in Aviva PLC fell 27 percent in London after Europe's biggest provider of life insurance and pensions products booked a net loss for 2008, due to a drop in the value of assets amid the financial crisis.
In Asia, stock markets were mixed after Wen Jiabao's comments about the Chinese stimulus plan. The 8 percent growth rate promised by Wen is seen as critical to creating jobs and staving off social unrest as the worst global economic crisis in generations hits the Chinese exports.
As the government boosts money for infrastructure, social programs and tax cuts, the country's budget deficit will surge to its highest level in six decades, Wen said at China's annual legislative session in Beijing.
The program outlined in Wen's nationally televised speech, while supplying a short-term jolt to confidence with its reiteration of the 8 percent growth target, was unlikely to bring about a lasting recovery in global markets, analysts said. With Western economies and the global financial system still in tatters, any spillover effects from China would be limited.
"Knowing China will be spending is comforting, but we have doubts whether this will help other countries' economies in the end," said Kelvin Lau, a regional economist at Standard Chartered Bank in Hong Kong.
Japan's Nikkei 225 stock average rose 142.53 points, or 2 percent, to 7,433.49 while South Korea's Kospi ended down 0.1 percent at 1,058.18 in a choppy session.
In China, Shanghai's benchmark gained 1 percent to 2,221.08 after jumping more than 6 percent the day before. Prices were initially down after Wen's speech, but rebounded on reports of a rise in bank lending and speculation a tax on stock trading might be cut.
Hong Kong's Hang Seng lost about 1 percent to 12,212.39. Benchmarks in Australia and Taiwan gained while Singapore and Indian stock measures fell.
Overnight, Wall Street snapped a five-day losing streak, buoyed by details of a Washington program to help as many as 9 million borrowers stay in their homes through refinanced mortgages or loans.
The Dow Jones industrial average rose 149.82, or 2.2 percent, to 6,875.84, and the Standard & Poor's 500 index added 16.54, or 2.4 percent, to 712.87.
Investors are likely to pay close attention to Friday's release of U.S. employment figures, a key barometer of the world's largest economy.
After soaring overnight, oil prices slipped in European trade, with benchmark crude for April delivery off $1.42 at $43.96 a barrel. Prices jumped $3.73, or about 9 percent, on Wednesday to settle at $45.38.
