World stock markets retreated on Thursday after the U. S. Federal Reserve forwarded a note of watchfulness in its latest evaluation of the world's No. 1 financial system.

The central bank's statement, which escorted a conclusion to leave interest rates at a record low, added to discomfort after feeble housing statistics recommended that the U. S. financial recovery is not smooth and susceptible to chaos in the markets.

In early European trade, France's CAC-40 plunged by 0.9%, Germany's DAX fell by 0.7% and Britain's FTSE 100 plunged by 0.6%. Futures pointed to faltering gains on the Wall Street.

Japan's standard Nikkei 225 stock index edged up by 4.64 points, or 0.1%, to 9,928.34 after exports jumped for a sixth straight month as brisk international demand for cars and high-tech products helped speed up a recuperation process in the world's second-largest financial system. South Korea's Kospi pocketed 0.8% increase to 1,739.87.

Australia's S&P/ASX 200 retreated 0.1% to 4,479.70 in the middle of news Australian Prime Minister, Kevin Rudd had been expelled as leader by the ruling party and replaced with his second-in-command.

In another place, Hong Kong's Hang Seng fell by 0.6% to 20,733.49 and the Shanghai Composite Index lost 0.1% to 2,566.75. Stocks in India, Singapore, Malaysia, Thailand, the Philippines and New Zealand all sank.