European markets closed lower on Friday as escalating diplomatic tensions between the world's two largest economies continued to weigh on sentiment.
The pan-European Stoxx 600 provisionally ended 1.7% lower, with tech stocks tumbling 3.8% to lead losses as all sectors and major bourses slid into negative territory.
Global investors will be reacting to China's retaliation to the U.S. decision to force the closure of the Chinese consulate in Houston, which it accused of being a hotspot for espionage and intellectual property theft.
In response, Beijing announced Friday that it is revoking the license of the U.S. consulate general in the southwestern Chinese city of Chengdu, and ordered the consulate to cease operations.
Mainland Chinese stocks plunged after the latest escalation, with the Shenzhen component diving more than 4% to lead a broad downturn in Asian markets.
U.S. futures are also pointing to a lower open on Wall Street later in the day, with investors also reacting to Thursday's disappointing unemployment claims figure and a continued scourge of the coronavirus, as the country on Thursday recorded its third consecutive day with more than 1,100 deaths from Covid-19.
In Europe, the U.K. and the European Union continue to diverge on a prospective deal over their post-Brexit trading relationship as the deadline to reach an agreement is pushed back to September. EU chief negotiator Michel Barnier warned Thursday that no progress had been made on the key issues and that a trade deal now looks unlikely. Britain's top negotiator David Frost said a deal was 50/50 and an accord could be reached by September.
Flash Markit PMI (purchasing managers' index) readings on Friday suggested that euro zone business activity rebounded in July, coming in at 54.8 and indicating that economic activity grew for the first time since February.
U.K. retail sales also came in much better than expected before the opening bell.