European, US Stocks Back to Yo-Yo Market

Traders work on the floor of the New York Stock Exchange before the Closing Bell in New York, New York, USA, on 08 August 2011. Photo by EPA/BGNES

European stock markets have lost ground, despite an earlier rally after the US central bank said it was likely to hold interest rates until 2013.

Markets in London, Frankfurt and Paris were all down 1% while Italy's FTSE MIB fell 3.6%, led lower by bank shares.

The rates announcement, and pledges of further support, had helped stem one of the biggest sell-offs in recent years.

US shares had their best day for two years, closing on Tueasday up 4% following the previous session's huge rally in the aftermath of the Federal Reserve's pledge to keep interest rates exceptionally low through the middle of 2013.

They fell sharply at the open on Wednesday however. The Dow Jones industrial average dropped 306 points, or 2.7%, the S&P 500 fell 28 points, or 2.4%, and the Nasdaq composite lost 70 points, or 2.8%.

The market's yo-yo action tends to spoil confidence among investors, and in turn, that lack of faith fuels additional volatility, analysts told CNN.

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