6.00pm BST

Here are the thoughts of some City analysts and traders on today's selloff in Europe (see 4.45pm for the closing prices), following the Japanese tumble.

Michael Hewson, senior market analyst at CMC Markets

When European markets opened this morning you could be forgiven for hearing a loud hissing sound as the air drained out of the strong rally we’ve seen unfold since the beginning of this month.

This morning’s sharp drop on the Nikkei was certainly one catalyst, but it certainly wasn’t the only one as we saw the Japanese index plunge sharply in a fall that saw every constituent in the index close lower, the first time that this has happened since 2005.

Whatever the catalysts behind today’s equity market sell-off they need to be put into the context of how far markets have risen this year. Since November last year the Nikkei has almost doubled in value so a 7% decline while significant, still leaves us much higher than when we started the year.

Rupert Osborne, futures dealer at IG

It is time to pull out the term ‘a sea of red’ to describe the day’s market action.

It has been quite a while since we’ve able to describe a market in this way, but the snowballing of selling that has characterised today aptly fits the description. European markets have taken one look at the Chinese PMI and the Fed minutes and have decided that they do not like them one little bit. However, now is the time for rational heads to prevail.

A sober look at the market action today shows that we are still up 13% for the year; given that the average performance for the year as a whole within the period 1984-2012 is 7.4%, investors could walk away from this market for the rest of 2013 and still be pleased with their performance.

Even with a 2.4% decline today we are only back to levels seen last Friday. In the context of a rally that has powered higher since late Autumn 2012, the loss of a week’s gains is small beer.

Julian Jessop of Capital Economics:

The weakness in global equity markets since the release of the FOMC minutes on Wednesday backs our view that the rally had become overly dependent on expectations of further support from monetary policy.

To recap, the FOMC minutes revealed that “despite some softness in recent economic data”, “a number” of Fed officials “expressed willingness to adjust the flow of purchases downward as early as the June meeting”. Judging by the most recent comments from Bernanke that the reduction could happen in the “next few meetings”, we still think that the FOMC is more likely to wait until its mid-September meeting. Either way, though, we continue to expect the Fed to scale back its asset purchases later this year and perhaps halt them completely early in 2014.

The main casualty on Thursday was the Nikkei. We began the week by predicting a correction of around 15% in Japanese equities over the remainder of the year. In the event, almost half that fall happened in a single day, with the Nikkei closing down 1,143 points at 14,484 (a decline of 7.3%).

Viewed in the least unfavourable light, the slump in the Nikkei could be seen simply as a temporary correction in what has otherwise been an exceptionally strong rally...

Putting Thursday’s move in perspective, the Nikkei has still gained around 67% since November.