European markets suffered a torrid Friday, after the U.S. Federal Reserve's overnight decision to hold interest rates at record lows fanned worries about the health of the global economy.
Uncertainty gripped investors, pushing the pan-European STOXX 600 to close down 1.8 percent, after recouping some earlier losses. Its ended down around 0.3 percent on the week.
Across Europe's major indexes, the picture looked bleak. Germany's DAX tanked more than 3 percent, putting it just shy of bear market territory, or a fall of 20 percent from the year's highs in April.
German stocks finished at 9,916 points. A close below 9,899 would have put the index in technical bear territory, down from 12,374 in April.
U.S. stocks fell sharply on Friday, pressured by concerns over the implications of the Federal Reserve's decision. The Fed decided to keep interest rates on hold at its September meeting on Thursday, staving off the first tightening of policy in the U.S. since 2006.
"Speculation will now shift to December as the next most likely month for U.S. rates to start rising. The 'data dependent' Fed will want to see further robust non-farm payroll growth between now and then, as well as indications that the pace of economic growth is not wilting under the pressure of China's slowdown," said chief economist at Markit, Chris Williamson.
"If the labor market continues to improve and push beyond full-employment alongside solid business survey data, which seems likely, it will be hard for the Fed to argue that a rate hike is not warranted, albeit with the potential for further financial market volatility adding an unknown element to the rate outlook," he added.
Oil prices suffered on Friday following the Fed's warning on the health of the global economy. Brent crude and WTI crude oil were both down well over $1 around the close of European markets, hitting energy stocks.
Insurance stocks were among the worst performers on Friday after the Fed's decision. Insurance companies benefit from higher interest rates because it means they get higher yields on the government bonds they invest in.
Banking stocks - another sector that benefits from higher interest rates - also took a hit on Friday. Deutsche Bank and BNP Paribas were among the worst affected, both closing more than 4.5 percent lower. Italian and Swiss lenders, including Credit Suisse and Intesa Sanpaolo, also closed sharply in negative territory.
Gold rose to a near three-week high, gaining around 0.5 percent to trade at $1,137, boosting mining stocks.
The Nikkei index on the Tokyo Stock Exchange and the broader Topix index were among the hardest-hit in Asia, down 2 percent ahead of an extended weekend. Markets in Japan will be shuttered until next Wednesday.
Looking ahead to next week, there's potential for further disruption in European markets after elections taking place in Greece at the weekend – the country's third time at the polls within a year.