European Stocks Extend Declines

European stock markets extended losses into a fourth straight day amid worries about the prospect of a reduction in Federal Reserve stimulus and political uncertainty in Greece.

The Stoxx Europe 600 index dropped 1.2%, to 280.40, closing at its lowest level in 2013 on Friday. The index fell 3.7% on the week and has fallen five consecutive weeks.

On Thursday, the index posted its largest one-day percentage drop since November 2011, hurt by comments from the U.S. Fed that it could start scaling back its $85-billion-a-month asset purchases later this year.

Global stock markets climbed to multiyear highs earlier in the year largely due to stimulus measures from central banks. Investors fear a reduction in bond purchases would create market turmoil.

Guy Foster, head of portfolio strategy at Brewin Dolphin, said the Fed worries continued to weigh on investors' minds on Friday.

"It was clearly a surprise with the hawkish statement from the Fed and then we had another disappointment from China a few hours later in terms of the HSBC HSBA.LN -0.44% purchasing managers' index," he said. "What was really surprising about what Bernanke said, was that we didn't think he would lay out a timetable. But he did lay out a timetable, but said it was going to be data driven. The market has really focused on the fact that asset purchases will end and ignored that it's likely to be data driven," he added.

"What the market would like to see now is some modestly bad news from the U.S. economy."

In the U.S., the Dow Jones Industrial Average was down 56 points, or 0.4%, in midday Friday trading after plunging 353 points on Thursday.

Greek stocks slumped after the Democratic Left party reportedly pulled out of the coalition government amid disagreement with Prime Minister Antonis Samaras's decision to close state broadcaster ERT last week.

The Athex Composite lost 6.1%, to 830.01, with National Bank of Greece ETE.AT -11.44% down 11%.

Adding to worries about Greece, the International Monetary Fund threatened to suspend aid payments to the country, unless euro-zone leaders move to plug a gap of €3 billion to €4 billion ($4 billion to $5.3 billion) in the country's rescue program, the Financial Times reported late Thursday. The report said the gap stemmed from central banks refusing to roll over Greek bonds.

A senior IMF official told CNBC on Friday that the suspension talk was "premature" and that the fund is still having discussions with Greece.

Germany's DAX index dropped 1.8%, to 7789.24, and closed 4.2% lower on the week. SAP SAP -2.43% fell 2.7% after U.S. peer Oracle ORCL -9.26% late Thursday reported sales below analysts' expectations.

France's CAC-40 index slid 1.1%, to 3658.04, and closed out the week 3.9% lower. Banks posted some of the biggest losses, with BNP Paribas BNP.FR -2.57% down 2.6%, Crédit Agricole 2.3% lower and Société Générale GLE.FR -2.14% off 2.1%.

Banks were also lower in the U.K., where Royal Bank of Scotland Group RBS.LN -7.24% gave up 7.2% and Barclays BARC.LN -2.26% lost 2.3%.

The U.K.'s FTSE 100 index shed 0.7%, to 6116.17. The index dropped 3% on the week. TalkTalk Telecom Group TALK.LN -5.96% declined 6% after analysts at Citigroup C -2.15% cut the firm to "sell" from "neutral."

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