On Wednesday the Fed’s chairman Ben Bernanke said the Bank could taper its QE programme by the end of 2013 and wind it down completely by mid-2014 if the US economy continues to improve in line with expectations.

Currently the Bank is buying $85bn (£54bn) worth of bonds each month and interest rates are at historic lows between 0% and 0.25%, but the chairman foresees an improvement in the economy, which would trigger a change in policy.

His speech triggered a sharp sell-off in equity markets, with the S&P 500 experiencing its biggest sell off in two weeks, down 1.4%, while the Dow Jones also shed 1.4%.

Elsewhere, Japan’s Nikkei closed down 1.7% at 13,014, after briefly dipping below the 13,000 mark.

Markets in Hong Kong and China also suffered a hefty sell off, reacting to both the Fed’s announcement and the weak Chinese manufacturing data for June.

The Hang Seng has plummeted 2.6% to 20,434 while the Shanghai Composite finished down 1.8%, at 2,105.

Index futures across Europe also signaled a sharply lower open on Thursday, with futures for the FTSE 100, Euro Stoxx 50, Germany’s DAX and France’s CAC all down between 1.3% and 1.6% at 6.02 am, according to Reuters.

A ripple effect was felt across bond markets, as treasury prices sank following the announcement and benchmark ten year treasury yields were pushed to a 15-month high, up 2.38%.

The US dollar rose broadly after Bernanke’s speech, while other global currencies fell. It gained 0.3% against the yen, trading at 96.9.