Stocks slide as European political fears top agenda

European stocks fell Friday in nervy trade before Italy's crunch referendum and Austria's elections, amid fears that both could send shockwaves reverberating across markets.

Four weeks since Donald Trump's stunning US election victory and five months after Britons voted to leave the European Union, this weekend's eye-catching events are squarely in the spotlight.

Italy goes to the polls on Sunday for a referendum on constitutional reform, with Prime Minister Matteo Renzi saying he will resign if his government loses, which may trigger a general election.

Austria's presidential election, also due Sunday, pits far-right hopeful Norbert Hofer against Greens-backed candidate Alexander Van der Bellen.

"European equities finished the week on a downbeat note, with most major indices ending both the day and the week lower," said market analyst Jasper Lawler at CMC Markets.

"Rising political risk in Europe is seeing funds flow to the US where companies potentially stand to benefit from lower taxes and regulation under Donald Trump," he added.

Milan shares ended the day down just 0.07 percent, although bank shares continued to be punished by investors as plans to recapitalise several lenders could be complicated by political volatility.

Meanwhile London gave up 0.3 percent, Frankfurt dipped 0.2 percent and Paris fell 0.7 percent.

In New York, US stocks were mostly higher after data showed the US unemployment rate dropped in November to its lowest level since August 2007, all but guaranteeing an interest rate hike by the Federal Reserve later this month.

The jobless rate fell three-tenths of a percentage point to 4.6 percent, with a solid 178,000 net new positions created, in line with analysts' expectations.

Despite an interest rate hike being positive for the dollar, it was down against the euro, yen and pound in late European trading, which analysts put down to the markets having already priced in a December move by the Fed.

- Politics Trumps economics -

But analyst Ipek Ozkardeskaya at London Capital Group warned that "the outcome of the (Italian) referendum could have a significant impact on the short-term euro volatility".

The expected rejection by voters of the referendum "could lead to PM Renzi's resignation and turbulence in the markets at the political upheaval," said XTB analyst David Cheetham.

However, trader Markus Huber at City of London Markets told AFP that "even if the No vote in Italy wins and Austria will get a far right president, any jitters this might cause for the markets should be short lived".

He pointed out the ECB has pledged to stand behind Italy if there were liquidity problems and that an increase to US growth from the economic policies of incoming US president Donald Trump was more important.

"A booming USA will help the entire global economy and the eurozone therefore (will be) much less prone to any crisis as investors won't lose faith and keep investing," said Huber.

In Asia, Japan's Nikkei, which on Thursday closed at its highest level this year, slipped 0.5 percent, while Hong Kong gave up 1.4 percent and Shanghai slipped 0.9 percent.

Oil prices drifted higher on Friday, but were up considerably over the week due to OPEC's decision Wednesday to cut oil production. Brent soared over 13 percent over the week.

- Key figures around 1630 GMT -

London - FTSE 100: DOWN 0.3 percent at 6,730.72 points (close)

Frankfurt - DAX 30: DOWN 0.2 percent at 10,513.35 (close)

Paris - CAC 40: DOWN 0.7 percent at 4,528.82 (close)

Milan - FTSE MIB: DOWN 0.07 percent at 17,087 (close)

EURO STOXX 50: DOWN 0.3 percent at 3,020.93

New York - Dow: DOWN 0.02 percent at 19,187.74

New York - S&P 500: UP 0.3 percent at 2,197.38

New York - Nasdaq: UP 0.4 percent at 5,269.81

Tokyo - Nikkei 225: DOWN 0.5 percent at 18,426.08 (close)

Hong Kong - Hang Seng: DOWN 1.4 percent at 22,564.82 (close)

Shanghai - Composite: DOWN 0.9 percent at 3,243.84 (close)

Euro/dollar: UP at $1.0672 from $1.0661 Thursday

Dollar/yen: DOWN at 113.84 yen from 114.11 yen

Pound/dollar: UP at $1.2676 from $1.2591

Oil - Brent North Sea: UP 20 cents at $54.14 per barrel

Oil - West Texas Intermediate: UP 20 cents at $51.26 per barrel