Volkswacht Bodensee - Stock markets sink on diminishing US rate cut hopes

London was additionally hit by data showing a 2.3-percent April slump in UK retail sales, days after hotter-than-expected inflation doused chances of a Bank of England rate-reduction any time soon.

"With earnings season largely behind us, we will now see markets following the economic data more closely, and unfortunately we look set for a protracted period of high rates if recent inflation data is anything to go by," said Scope Markets analyst Joshua Mahony.

Confidence was dealt a further blow as a US gauge of the services sector showed activity rose at its fastest pace in a year, while the factory sector also beat forecasts.

Fewer people than estimated made unemployment claims, suggesting the labour market remains tight.

Thursday's readings indicated the world's top economy remained resilient, quelling the excitement sparked by last week's news that the consumer price index slowed in April after three months of topping forecasts.

"The data erase some of the cooling signals in recent outcomes and contrast the month-long run of broader US data tending to surprise on the soft side," said Taylor Nugent of National Australia Bank.

The figures came after minutes from the Fed's May policy decision showed decision-makers wanted to keep borrowing costs elevated until they are confident prices are under control, while some even said they were willing to hike again.

All three main indices in New York ended in the red, and Asia followed suit Friday.

- Key figures around 1030 GMT -

London - FTSE 100: DOWN 0.4 percent at 8,306.06 points

Paris - CAC 40: DOWN 0.2 percent at 8,088.70

Frankfurt - DAX: DOWN 0.3 percent at 18,627.08

EURO STOXX 50: DOWN 0.4 percent at 5,018.89

Tokyo - Nikkei 225: DOWN 1.2 percent at 38,646.11 (close)

Hong Kong - Hang Seng Index: DOWN 1.4 percent at 18,608.94 (close)

Shanghai - Composite: DOWN 0.9 percent at 3,088.87 (close)

New York - Dow: DOWN 1.5 percent at 39,065.26 (close)

Dollar/yen: UP at 156.95 yen from 156.93 yen on Thursday

Euro/dollar: UP at $1.0843 from $1.0815

Pound/dollar: UP at $1.2721 from $1.2696

Euro/pound: UP at 85.23 from 85.16 pence

West Texas Intermediate: DOWN 0.8 percent at $76.23 per barrel

Brent North Sea Crude: DOWN 0.8 percent at $80.74 per barrel

C.Bruderer--VB