European stock markets retreated on Friday and the euro steadied versus the dollar as traders awaited US economic growth data, at the end of a week in which indices have risen on expectations of an interest rate cut by the ECB.
London's FTSE 100 (FTSE: ^FTSE - news) index of leading companies fell 0.49 percent to 6,410.72 points in late morning deals, while in Frankfurt the DAX 30 (Xetra: ^GDAXI - news) shed 0.72 percent to 7,776.82 points and the Paris CAC 40 slid 0.98 percent to 3,802.68.
The euro edged up to $1.3014 from $1.3009 late on Thursday in New York. The dollar fell to 98.65 yen from 99.29.
New data released on Friday suggesting that euro area credit markets remain highly dysfunctional turned up the heat on the European Central Bank to act, analysts said.
The ECB published two sets of data showing that lending activity in the 17 countries that share the euro remains at very low levels, not only because of weak demand, but also because firms are finding it difficult to obtain financing.
Meanwhile, on the London Bullion Market, gold rose to $1,461.47 an ounce compared with $1,451 Thursday.
"GDP figures from across the Atlantic are set to decide sentiment today with analysts forecasting a surge" in US growth, said Capital Spreads dealer Marius Paun.
"Much of the pick-up is due to previously delayed defence spending taking place and businesses stocking up on inventory, which, after the recent surprise negative retail sales data indicated, they may fail to shift later in the year.
"Similar to the UK, serious headwinds are on the economic radar in the US and even if the figure comes out near the top estimates, it won't be any reason to break out the ticker tape parade," he added.
In company news Friday, shares in French high-end retailer PPR (Milan: PP.MI - news) slumped 5.83 percent to 168.1 euros as investors expressed disappointment at the company's small increase in first quarter sales.
"We feared being disappointed by the publication of the quarterly sales," said a Paris trader. "But the reality surpasses fiction, and by far."
Sales in the January to March period rose to 2.36 billion euros, a rise of 1.0 percent.
Elsewhere, Spain's third largest bank BBVA (Madrid: BBVA.MC - news) slid 1.27 percent to 7.20 euros after the lender reported a 73-percent jump in first quarter net profits compared with the same period a year ago, boosted mainly by the divestment of non-strategic assets.
On the bonds market, Italy's Treasury on Friday sold 8.0 billion euros in six-month bills at lower rates than in a similar sale last month, indicating an easing of investor nerves as talks on forming a new government drag on.
The rate demanded by investors was 0.503 percent compared to 0.831 percent on March 26 -- and the amount raised was the maximum targeted although demand was down from the previous auction.
Most analysts predict a new government will be formed by the weekend, ending a two-month deadlock since a general election in February.
Asian stock markets mostly closed lower on Friday, the end of a broadly positive week, with Tokyo dipping on the back of a pick-up in the yen after the Bank of Japan held off any new measures to boost the economy, traders said.
On Wall Street, US indices finished a volatile trading session higher following improved jobless claims data and a mixed bag of corporate earnings.
New claims for US unemployment benefits fell last week to the lowest level since mid-March. Initial claims came in at 339,000, down from the prior week's revised reading of 362,000.