European stocks closed sharply lower on Friday after Wall Street stock indexes dropped and data showed Germany's exports fell in July.
The pan-European STOXX 600 closed down more than 1.1 percent, with almost all sectors in negative territory. The index finished the week down 1.45 percent.
Data from Germany showed exports fell 2.6 percent in July. This was the latest piece of bad news about Germany's economy, following disappointing manufacturing data earlier in the week.
Meanwhile, yields on 10-year German Bunds turned positive for the first time since June 22. Yields were around 0.013 percent at the time of the market close, up from -0.06 percent on Thursday.
"The jolt across bond markets began when ECB president Mario Draghi said the governing council did not discuss extending its asset purchase program. Understandably, bondholders got a little nervous about holding onto a negative-yielding asset which could fall in price if there's no central banking buying alongside them," Jasper Lawler, market analyst at CMC Markets, said in a note on Friday.
Investors were left disappointed after the ECB kept its benchmark refinancing rate at 0 percent on Thursday and did not change its trillion-euro bond-buying plan, saying the program would run until the end of March 2017 or beyond if necessary.
Investors had expected the central bank to extend the deadline for quantitative easing, but Draghi said the central bank had not discussed this at its policy-setting meeting.
"Yesterday's no-change stance, however, does not diminish the need for further easing. But there was no explicit mention of fresh measures under consideration, spurring a knee-jerk negative reaction in the markets," Radhika Rao, an economist at DBS Bank, said in a note on Friday.U.S. shares fell sharply on Friday fears of a looming interest rate hike by the Federal Reserve. The Dow Jones Industrial Average, the S&P 500 and the were down around 1 percent.
Italian banks were in focus for investors following heavy news flow from the sector. Banca Monte dei Paschi di Siena's chief executive, Fabrizio Viola, stepped down on Thursday as the bank seeks an emergency rescue plan. The troubled Italian lender said it would find a replacement quickly. BMPS shares closed lower by more than 2 percent.
Unicredit shares were in negative territory after the bank said on Thursday it had sold its a portfolio of bad loans worth 570 million euros ($640 million) to Balbec Asset Management. Shares in the bank finished down around 1.5 percent.
In Germany, Commerzbank is mulling plans to split up its business for lending to small and medium-sized firms and reduce the size of its investment bank, according to Handelsblatt newspaper. Shares of Commerzbank traded higher and closed up 0.4 percent.
Elsewhere, British pub chain JD Wetherspoon reported a 5.4 percent year-on-year rise in revenue for its fiscal year, with profit before tax up 3.6 percent. Shares of the firm traded higher. Rival Greene King however, closed in negative territory, after it warned on tougher trading conditions after Brexit.
Pharma giant Novo Nordisk closed down 2.15 percent after JP Morgan cut its price target for the stock.
Oil markets were also in focus for investors. Oil prices pulled back on profit-taking on Friday after settling more than 4 percent higher a day earlier as government data confirmed a surprisingly huge drawdown in U.S. crude inventories.
Meanwhile, markets in Asia closed mostly lower amid news that North Korea conducted a test of a nuclear weapon, possibly its largest one yet.