By Marcus Leach

The Federal Bank have sparked mass drops in global shares by announcing limited measures designed to boost growth having given a stark warning about the state of the US economy.

Morning trading in Europe saw all major markets drop, with the FTSE down 4% and the Cac-40 down 4.32%. Elsewhere the Dow Jones was 2.5% down at the end of trading on Wednesday.

The Federal Bank warned of 'significant downside risks', and then announced a bond swap programme aimed at keeping long-term interest rates as low as possible.

"Recent indicators point to continuing weakness in overall labor market conditions, and the unemployment rate remains elevated," warned the Federal Bank.

"There are significant downside risks to the economic outlook, including strains in global financial markets."

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