Europe close: Equity markets in the red amid fears for world growth

LONDON (ShareCast) - (ShareCast News) - European stocks closed firmly in the red on Friday, as the Federal Reserve's downbeat assessment and decision to stand pat on rates fanned concern over global growth. The benchmark Stoxx Europe 600 index closed 1.78% lower or down by 6.44 points at 354.77, while France's CAC 40 surrendered 2.56% to finish at 4,535.85 and Germany's DAX another 3.06% to 9,916.16.

Janet Yellen's caution on global growth was a boon for investors in sovereign bons. Gilts flew higher, sending their yields lower by 13 basis points to 1.83%. Those on similarly dated Italian bonds dropped by 10 basis points to 1.81%.

The euro gave back a tad of the previous session's sharp gains against the Greenback.

Fed stays put Fed chair Janet Yellen said on Thursday that the slowdown in China and recent market volatility played a part in the decision to keep rates on hold, although she also pointed out that the central bank had not turned "significantly less confident".

"We still anticipate that rising wage and price inflation next year will eventually force the Fed to tighten policy much more aggressively," said Capital Economics' chief US economist Paul Ashworth.

"The longer the Fed delays now the higher interest rates will eventually have to go. But the way things are going, more of that tightening is going to be back-loaded into the second half of next year." In addition, Yellen said a rate hike next month was still a possibility.

The policy statement highlighted "solid job gains and declining unemployment" and reiterated that "economic activity will expand at a moderate pace".

However, analysts warned that more volatility was expected in the short-term future, as markets will struggle for direction.

"Now (NYSE: DNOW - news) that the anchor of the September FOMC meeting has been and gone, it is likely that that markets will struggle for any kind of firm direction going forwards, especially since next week doesn't bring with it too much to provide any definitive guidance," said Spreadex's financial analyst Connor Campbell.

Greek elections ahead On the economic data front, figures released earlier showed the Eurozone current account surplus declined in July.

According to the European Central Bank, the current account balance, a gauge of an economy's international financial position, recorded a €22.6bn surplus in July compared with a €24.9bn surplus in June.

In the 12 months to July the surplus amounted to 2.6% of the Eurozone gross domestic product, compared with 1.8% a year earlier. Across the Atlantic, the US Conference Board's leading economic indicators edged slightly higher in August, data released on Friday showed.

Not to be missed, when investors return from theirs weekend they will be asked to digest the result of the Greek general elections on 20 Sunday. A grand coalition with the left-wing Syriza party holding a majority, but alongside more moderate partners, is viewed as the most likely outcome by analysts - and as a positive force for 'stability'.

The index climbed 0.1% in August from a -0.2% reading in the previous month, but short of forecast calling for a 0.2% increase.

In company news, shares in German utility RWE (Xetra: 703712 - news) dropped 7.45% after the company ruled out selling a stake to a Middle East investor.

UniCredit (EUREX: DE000A163206.EX - news) was on the back foot following media report that the Italian bank is planning to cut about 1,500 jobs at its German subsidiary.

Front month Brent crude futures finished the session 2.31% lower at $47.97 on the ICE.