Swedish stocks plunged on Thursday as investor fears over rising debt levels in some eurozone member states became more acute and US data offered scant hope for a recovery in the jobs market there.

The OMX Stockholm 30 index fell 2.20 percent Thursday while OMX Nordic 40 (also including shares in Helsinki, Copenhagen and Reykjavik) was down 2.45 percent.

London's benchmark FTSE 100 index plunged 2.17 percent to 5,139.31 points, the Paris CAC 40 ended sharply down by 2.75 percent at 3,689.25 points and the Frankfurt Dax plummeted 2.45 percent to 5,533.24 points.

But Madrid led the pack, with the Ibex-35 index there closing down 5.94 percent as investors grew increasingly nervous that countries like Spain and Portugal could be in for the same troubles as debt-ridden Greece.

The DJ Euro Stoxx 50 index of top eurozone shares crashed 3.46 percent.

Mining companies and banks were among the biggest losers on Thursday after commodity prices suffered from a strengthening US dollar.

Shares in British bank Barclays fell 7.84 percent to 272.20 pence, while mining giant Fresnillo plunged 5.23 percent to 671 pence.

"Investors have certainly moved more to the defensive sectors and left riskier equities such as banking and commodity stocks," said Nick Serff, a market analyst at London-based financial spread better City Index.

There were also jitters over an anxiously-awaited US monthly unemployment report due on Friday, while data out on Thursday showed that initial US claims for unemployment insurance rose by more than expected last week to 480,000.

"We are disturbed by the run of recent claims numbers," said Ian Shepherdson at High Frequency Economics, a US-based market analysis company.

"It is starting to look as though the downward trend in claims, which has been key to the story of payroll gains in the next few months, has stalled."

The unemployment rate in the United States is currently at 10 percent.

Wall Street meanwhile tracked the plunges in Europe, with the Dow Jones down 2.02 percent and the Nasdaq falling 2.10 percent in afternoon trading.

"European bourses and bond markets are lower on mounting concern that the Greece scenario will spread to others," said Jon Gencher at Canadian financial services provider BMO Capital Markets.

Patrick O'Hare, an analyst at research group Briefing.com, said there was scepticism about Greece and fears were raised after Portugal apparently did not sell as many bonds as indicated and Spain raised budget deficit forecasts.

"The anxiousness about the budget woes for these countries was reflected in rising costs to insure against the risk of default on their government debt."

There was a similar trend on other European stock markets, with Brussels falling 2.96 percent, Milan down 3.45 percent and Zurich tumbling 2.40 percent.

In foreign exchange trade, the European single currency tumbled to the lowest point since June after the European Central Bank kept its interest rate steady but warned eurozone economies to get their public finances in order.

"Investors continued to show concern for goings-on with the so called PIGS -- Portugal, Ireland, Greece and Spain -- as the euro hit fresh six-month lows versus the dollar," Serff said.

Neil MacKinnon at Russian bank VTB Capital said: "Sovereign risk is again back on the agenda as the financial markets are unconvinced about Greek budget plans and are worried about 'contagion' elsewhere in the eurozone."

In London meanwhile the Bank of England on Thursday froze its radical policy of pumping massive amounts of new money into the economy but did not rule out further aid as Britain faces a tough recovery from recession.

The widely-expected news, which came as the BoE also decided to keep its key interest rate at a record-low 0.50 percent, followed recent official data showing that Britain only just escaped recession in the fourth quarter of 2009.

Traders were also responding to some less than encouraging earnings news after energy giant Royal Dutch Shell reported a plunge in annual profits, blaming a weak global economy and an uncertain outlook as it axed 1,000 jobs.

The group said that net profit tumbled 52 percent to 12.52 billion dollars (9.0 billion euros) last year from 26.28 billion dollars in 2008.

In Asia on Thursday, the crisis surrounding Toyota's recall of millions of cars around the world weighed on Japanese stocks. The Tokyo stock market lost 0.46 percent and Hong Kong shed 1.84 percent in value.