By Tommy Stubbington
European stocks fell sharply Friday, pummeled by concerns over
the future of Greece and fresh signs that the U.S. economy is
struggling to lift off.
The Stoxx Europe 600 ended the session 1.7% lower, deepening the
previous day's losses. Germany's DAX index wa s down 2.3%, France's
CAC 40 was down 2.5%, and the U.K.'s FTSE 100 was down 0.8%. Stocks
in the U.S. slipped as well.
Mixed messages on the state of Greece's negotiations with its
international creditors has rattled markets this week.
"There are no serious signs of improvement or an imminent deal,
and that is what is really keeping investors on their toes," said
Philip Lawlor, a partner at London-based Smith & Williamson
Investment. "No one wants to take any unnecessary risks ahead of
the weekend."
Figures from the European Central Bank out Friday showed that
deposits at Greek banks hit their lowest level in more than 10
years in April.
International Monetary Fund head Christine Lagarde added to
jitters in comments in a German newspaper interview that wouldn't
rule out a Greek exit from the euro. International lenders on
Friday insisted they weren't considering pushing Greece out of the
currency.
"We've had a lot of divergent information on the Greek situation
this week, but to hear this from the IMF is significant. It's a
reminder that Greece is still a risk hanging over European
equities," said François Savary, who oversees about $10 billion of
assets as chief investment officer at Swiss bank Reyl.
Frederik Ducrozet, an economist at Crédit Agricole, said he
still thinks that a last-minute deal to avoid a Greek default will
be reached, but that the risks to that scenario are increasing.
Mr. Lawlor said that another major trigger for Friday's
stock-market selloff was data out of the U.S.
Figures showed that the U.S. economy contracted in the first
quarter of the year. Separate data showed that U.S. consumer
sentiment dropped in May to a six-month low.
"Greece has been bubbling all week, but this data is perhaps
worse than most had expected so it is certainly one reason for the
end-of-week lurch lower in European markets," Mr. Lawlor said.
The S&P 500 was 0.3% lower shortly after European markets
closed.
In currency markets, the euro climbed 0.1% against the dollar to
$1.098. Analysts said, however, that big gains are unlikely while
Greek uncertainty looms.
"[The euro] continues to wait for headlines from Greece; there
is still no deal and international creditors seem to suggest that
one isn't imminent either," said foreign-exchange analysts at
Citigroup.
In commodities markets, Brent crude oil climbed nearly 4% to
$65.03 a barrel, while gold was broadly flat at around $1,189 a
troy ounce.
-- Josie Cox contributed to this article
Write to Tommy Stubbington at tommy.stubbington@wsj.com