Financial markets are braced for large interest rate cuts across Europe on Thursday amid mounting evidence of a sharp slowdown in the leading global economies.

In the eurozone, traders priced in a 0.75 percentage-point reduction by the European Central Bank to 2.5 per cent, a move that would be bigger than any it has made in its near 10-year existence. Although economists were a little more cautious, with inflation risks disappearing fast, they nevertheless believed a three-quarter percentage point reduction was a distinct possibility.