European stock markets slid on Friday as a rally inspired by the US interest rate hike petered out heading into the weekend break.
The Frankfurt and Paris exchanges closed down more than 1 percent, while London ended the day off by 0.76 percent.
The euro picked up to US$1.0845 in foreign exchange deals, having fallen heavily on Wednesday after the US Federal Reserve raised borrowing costs for the first time in almost a decade.
Europe’s main indices rallied on Thursday after the US central bank ended months of uncertainty surrounding interest rate policy.
The Fed raised its benchmark federal funds rate, locked near zero since the 2008 financial crisis, by a quarter point to 0.25-0.5 percent, saying the US economy is growing solidly.
The move highlighted a growing divergence in monetary policy between the US policymakers and their overseas counterparts.
The European Central Bank and Bank of England are propping up the eurozone and British economy with billions of dollars worth of economic stimulus by buying assets such as bonds.
“Bullish Fed rhetoric can only get you so far,” said Michael Ingram, a market strategist at BGC Partners in London. “None of the worries about global growth and financial instability have really gone away. Given year-to-date performance, any Santa Rally is likely to prove cold comfort.”
The STOXX 600 rose 4.4 percent in the three days through Thursday on optimism that the Fed would judge the world’s biggest economy strong enough to cope with higher borrowing costs.
Exporters and financial companies led a rally on Friday after the Fed move.
While the STOXX 600 posted its first weekly rise in three, it is still down 6.3 percent this month. After a 14 percent jump from its September low through the end of last month, the gauge lost as much as 9.3 percent amid disappointing stimulus measures from the European Central Bank and a deepening of the rout in commodities.
European stock volatility jumped 5.9 percent.
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