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European stocks close sharply lower, battered as investors flock to safety

European markets closed sharply lower on Friday, as falling oil prices, upcoming risk events and economic growth concerns weighed on sentiment.

The pan-European STOXX 600 index closed 2.3 percent lower on the day, with all sectors posting sharp losses. It was down 2.4 percent on the week.

European Markets: FTSE, GDAXI, FCHI, IBEX

The German DAX closed provisionally down 2.5 percent on the day, the French CAC was down 2.2 percent and the U.K.'s FTSE 100 was 1.8 percent lower.

U.S. stocks indexes also traded lower on Friday and sovereign bond yields continued to slide.

Benchmark 10-year German bund yields fell to an all-time low of 0.011 percent, leaving traders mulling if a 0 percent or negative yield loomed. Yields then recovered slightly in late European trade.

"I think everyone is spooked by European stocks, especially the DAX, getting slammed today ... If the German 10-year bund yield gets below 0, they're just spooked by that," Jeremy Klein, chief market strategist at FBN Securities, said.

"I think it's a combination of, this is not good for financials and is this emblematic of what's going with the economy?" he added.

Global yield crush

Investor sentiment has been dented by concerns about the global economy and the upcoming "Brexit" vote in the U.K. on leaving the European Union.

On Friday, Jens Weidmann, president of the German central bank, warned that an extended period of ultra-loose policy from the European Central Bank (ECB) might increase the risk of a sudden jump in risk premia, Reuters reported. This came a day after ECB president Mario Draghi warned of "lasting economic consequences" from years of economic stagnation.

Elsewhere, the Russian central bank cut its key interest rate to 10.5 percent from 11 percent.

A drop in crude oil prices, partly due to the stronger U.S. dollar, also helped push stocks lower around the globe. Brent crude and U.S. WTI futures held around $50 per barrel, with support still coming from supply outages and strong refinery demand.

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Lufthansa was near the bottom of Europe's benchmarks, ending down around 5.6 percent, after the German airline announced the surprise resignation of CFO Simone Menne. She will step down at the end of August.

Among other poor performers was recruitment company Hays, which ended 6.2 percent lower after Deutsche Bank cut its price target on the stock and reduced its rating to "sell".

Air France-KLM also underperformed, ending down 4.5 percent after RBC cut its price target on the stock.

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—With contribution from CNBC's Evelyn Cheng.