Stocks set to sink

NEW YORK (CNNMoney.com) -- U.S. stocks were headed for a sharply lower open Wednesday, after reports of slower growth in China and a downbeat outlook from the Bank of England rattled investors and sparked a selloff in world markets.

Dow Jones industrial average (INDU) S&P 500 (SPX) and Nasdaq (COMP) futures were down about 1.5%. Futures measure current index values against perceived future performance.

U.S. stocks fell Tuesday after the Federal Reserve issued a cautious outlook about the recovery. Stocks had been sharply lower for much of the session but pared losses as investors were heartened by theFed's plan to buy more long-term Treasurys.

"The Fed's offer to take a small step in stimulating the economy by using quantitative easing measures has not impressed global markets," said Peter Cardillo, chief market economist at Avalon Partners.

In its policy statement, the central bank said the pace of recovery has slowed and that it expects economic growth to be "more modest in the near term than had been anticipated."

World markets: European markets tumbled in the early going. Britain's FTSE 100, France's CAC 40 and Germany's DAX all fell almost 2%.

"We're seeing a reaction to major economic powerhouses showing signs of lower economic activity, and that's raising the fear factor on the global recovery," Cardillo said.

The Bank of England lowered its forecast U.K. economic growth, and said inflation is likely to be below the 2% target in 2012.

In Asia, Japan's benchmark Nikkei plunged 2.7%. The Hang Seng in Hong Kong fell 0.8%, while the Shanghai Composite rose 0.5%.

Inflation accelerated to 3.3% in July in China, from a 2.9% rise the previous, but that missed economists' expectations for a 3.4% rise. Meanwhile, industrial production in China continued to ease to the lowest level this year, rising 13.4% from a year earlier, and retail sales also slowed.

Economy: On Wednesday, a report on the trade balance comes out at 8:30 a.m. ET.

Economists surveyed by Briefing.com expect the balance to have narrowed $42.2 billion in June, from $42.3 billion in May.

Investors will also be watching the Treasury budget, which is due out at 2 p.m. ET.

Companies: Walt Disney (DIS, Fortune 500) posted a 40% rise in quarterly profit after U.S. markets closed Tuesday. The results easily topped Wall Street's expectations.

Currencies and commodities: The dollar gained against the euro and U.K. pound, but was down versus the Japanese yen.

Oil futures for September delivery fell 85 cents to $79.40 a barrel.

Gold futures for December delivery rose 70 cents to $1,1988.70 an ounce.

Bonds: Prices for Treasurys were higher. The yield on the 10-year note was 2.72% from 2.77% late Tuesday. The U.S. will offer $24 billion in 10-year notes later in the day.