European stocks slide as US fiscal deal hopes ebb

European stock markets sank on Friday, mirroring losses in Asia, as sentiment was rocked by unsuccessful talks to avert "fiscal cliff" measures that threaten to push the United States back into recession.

Traders also digested official data showing that the British economy grew by a downwardly-revised 0.9 percent in the third quarter of the year.

At close in Europe, London's FTSE 100 index of leading companies fell 0.31 percent to 5,939.99 points, Frankfurt's DAX 30 dropped 0.47 percent to 7,636.23 points, while in Paris the CAC 40 dipped 0.15 percent at 3,661.40 points.

Milan's FTSE Mib index regained some ground, ending the day 0.40 percent lower to 16,223.36 points as Italian lawmakers voted on a 2013 budget that is set to trigger the resignation of Prime Minister Mario Monti.

The European single currency fell to $1.3166, from $1.3241 late in New York on Thursday.

"The world hasn't ended -- but hopes for a deal to avert the US fiscal cliff before the year-end may soon come to an end after the latest developments in Washington," said ETX Capital strategist Ishaq Siddiqi.

Saxo Bank analyst Andrea Tueni said: "It's a unusual session, dominated by US budget questions which remain the big question this end of the year."

Wall Street moved sharply lower Friday on the deadlock in Washington, with the Dow Jones Industrial Average off 1.37 percent, the tech-heavy Nasdaq down 1.47 percent and the S&P 500 losing 1.42 percent.

Global share prices have fallen on fresh concerns over the fiscal cliff of automatic tax hikes and spending cuts that are due to kick in on January 1 -- and could send the world's biggest economy spinning back into recession.

On Thursday, Boehner scrapped a vote on a bill that would have extended tax cuts for all Americans earning less than $1 million even if a wider deal could not be struck.

The move, which he described as his "Plan B", was dropped because he did not have enough support. Boehner said his party would recess until after Christmas.

The measure had been blasted by President Barack Obama's Democrats as a diversionary tactic that would never have passed in the Senate, where they hold a majority.

Now both parties must come up with a budget that will cut the country's deficit with less painful measures before the start of January.

In reaction in Asian trade, Hong Kong shares dropped 0.68 percent, Tokyo fell 0.99 percent, Seoul shed 0.95 percent and Sydney was 0.23 percent lower.

In company news on Friday, British defence giant BAE Systems announced a £2.5-billion ($4.1-billion, 3.1-billion-euro) deal to supply 12 Eurofighter Typhoon fighter aircraft and eight Hawk trainer jets to Oman.

However, BAE shares declined by 0.55 percent 340.50 pence on the London market.

British insurer Aviva saw its share price drop 0.34 percent to 382.70 pence, despite agreeing to sell its US life insurance business for $1.8 billion as part of a strategic overhaul.