The U.S. Federal Reserve cited concerns over the global economy and financial market volatility among the factors that played a role in keeping interest rates near zero.
Europe's markets slumped on Friday following a sell off in Japanese stocks and average gains in Asia. The EuroStoxx 600 traded over 2 percent lower. French and German stocks both tumbled in excess of 3 percent in the afternoon trading in the aftermath of the Fed's decision to hold rates.
U.S. stocks followed suit, plunging more than 1 percent pressured by concerns over the implications of the Federal Reserve's decision to leave short-term interest rates unchanged.
"If the Federal Open Market Committee's objective was to convey confusion, it has succeeded, thereby ploughing a deep furrow of instability and destabilization, and shining a very bright light on the large debt and liquidity trap it and other G7 central banks have spent seven years crafting," said Marc Ostwald, strategist at ADM Investors Services.
Speculation on the Fed's move has kept markets on edge for months and, along with China growth fears, has caused severe volatility across most asset classes, with global stock markets losing a hefty $5 trillion of their value in 6 days in August according to Deutsche Bank.
From the summer peak to August low, global equities fell by around 12 percent, mostly in the week leading up to the 'Black Monday' mini-crash on 24 August. Many equity markets fell by 20 percent from their previous highs, putting them in official 'bear market' territory, with China leading the way.
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Now markets are looking to the new "dot path" which details Fed members' projections for interest rates in the world's biggest economy and are studied by traders to try and figure out the future path of interest rates.
The dot plot now shows the path for rates to be more dovish. In June the median dot indicated rates of 1.625 percent by the end of 2016, while the current median dot is at 1.375 percent.
"A dovish and dithering Fed inspires little confidence The Fed's decision to leave rates on hold was not a surprise to a market positioned that way but the tone of the statement and the new lowered 'dot-path' (median sees one hike this year, four in 2016, five in 2017 and three in 2018 for a 3.375 percent Funds rate peak) have dragged Treasury yields down. That is not dollar-supportive," said macro strategist at Societe Generale, Kit Juckes.
"However, any bounce in risk assets will be short-lived," Juckes said, adding that in currency markets, the Yen "could be the biggest winner" if the risk mood sours.
The dollar hit a three-week low against a basket of major currencies on Friday after the Fed's decision, while gold rose to a two-week high of $1,136.