Stock markets around the world gave a cool response to the quarter-point cut in US interest rates by the Federal Reserve, with some analysts suggesting that the cut was too small to prevent further weakening in world economies and markets.

The negative tone on the market was exacerbated by an exceptionally gloomy report from the International Monetary Fund, which warned of dangers in a whole series of world economies and the need for interest rate cuts in the US and Europe. The IMF report was prepared ahead of the quarter-point cut in rates by the Federal Reserve, but analysts said that the IMF was undoubtedly thinking of a more substantial cut.

Wall Street, which fell immediately after the Fed's announcement on Tuesday night, was sharply lower in yesterday's trading, due to lingering disappointment that the Fed had not cut rates by a half-point as well as a new round of corporate profit warnings - this time from RJR Nabisco and Unocal.

"On top of some disappointment over the Fed cut, we got another reminder from RJR Nabisco that we're entering earnings season and that none of the problems have gone away," said one analyst. At the close last night, the Dow was down 237.90 on 7842.62.

The weakness in Europe and later in North America was preceded by another dismal session in the Far East - particularly in Tokyo - where the Nikkei index fell 3 per cent to a new 12-year low, driven downwards by deepening concerns over Japan's recession and banking crisis. Brokers said they were expecting grim news from the Bank of Japan's key Tankan business confidence survey, due out before the market opened last night.

But it was not all downward movement in the Far East, with Hong Kong rebounding 0.6 per cent while share prices in Singapore, Jakarta and Manila were all marginally higher.

Dealers said the quarter-point cut in the US Federal funds rate was widely expected and shrugged off by most stock markets. "There is no fresh incentive as the market had discounted the US interest rate cut," said Mr Ben Kwong, research head at Dharmala Securities in Hong Kong.

That sentiment also dominated European markets where share prices fell modestly in London and Dublin but more substantially on the continent where the CAC40 index in Paris was down more than 4 per cent and the DAX index in Frankfurt down more than 2 per cent.

The markets will be watching closely for any signs of concerted efforts by the developed economies to cut rates in an effort to stimulate then global economy. Analysts believe that Tuesday's cut by the Fed may be followed by another quarter-point cut in the months ahead, while the Bank of England is expected to reduce British interest rates at the next meeting of its monetary policy committee.