Stock markets on both sides of the Atlantic retreated Friday as investors banked profits from the week's rally sparked by massive government and central bank action to protect economies from the coronavirus.
"Today's sell off is most probably a consequence of three days of strong gains and a paring of risk ahead of the weekend," said Michael Hewson at CMC Markets UK.
He said it was "a welcome sight to see European stocks finish the week higher for the first time since mid-February, offering a welcome respite to some pretty battered portfolios."
Oil markets saw another dismal day under the twin impact of the pandemic and an ongoing price war, with European benchmark Brent crude plumbing lows last seen in 2003.
On Wall Street, the Dow Jones index was down by more than 700 points in midday New York trading, while in Europe key indices were also deeply in the red at the close -- although still booking solid weekly gains, some by double digits.
"European markets have pulled back... with caution being the order of the day after such a good rally," said Neil Wilson, chief market analyst at trading group Markets.com.
"Stimulus efforts have calmed markets" this week, Wilson said.
Earlier, Asian stock markets had mostly managed to record more gains.
- Sharp but short? -
Support measures which the G20 said amounted to $5 trillion have given traders hope that the expected global recession will be sharp but short.
Even news that a record 3.3 million Americans claimed unemployment benefits last week -- smashing the previous all-time high of 695,000 in 1982 -- did little to derail a more sanguine attitude among investors.
Dan Skelly at Morgan Stanley Wealth Management said stocks, after being clobbered in recent weeks, were now showing signs of bottoming out.
"While we do believe this will be possibly the sharpest recession in history, it may also be the shortest, so there is room to be optimistic for a second-half rebound," he told Bloomberg TV.
Support this week has come largely from a $2-trillion US stimulus bill that is making its way through Congress and which is expected to be passed by the House of Representatives Friday before being signed off by President Donald Trump.
"For investors, this package should be good for US equities and other risk assets as it should leave US corporations in a better position to weather the economic downturn and thrive in the rebound," said David Kelly, at JP Morgan Asset Management.
On Thursday, Federal Reserve chief Jerome Powell said the US central bank would continue to "aggressively" pump liquidity into the economy.
- 'Historic imbalance' -
The Fed's promise to effectively print cash has sent the dollar tumbling this week and it continued to fall across the board Friday -- including against the euro which earlier had a spell of weakness following Germany's own rescue package.
The upper house of Germany's parliament on Friday approved almost 1.1 trillion euros ($1.2 trillion) to shield Europe's largest economy from the impact of the pandemic.
Oil tanked again for reasons that were "simple: a massive imbalance of historic proportions", said Fawad Razaqzada, an analyst at Trading Candles
"Global demand has slumped because of the Covid-19-related lockdown. Supply, which was already higher than needed, is currently excessive to say the least as Saudi, Russia and the US fight to win market share. The weakness is likely to persist for a while yet," he said.
- Key figures around 1640 GMT -
London - FTSE 100: DOWN 5.5 percent at 5,498.63 points (close)
Frankfurt - DAX 30: DOWN 3.7 percent at 9,632.52 (close)
Paris - CAC 40: DOWN 4.2 percent at 4,351.49 (close)
EURO STOXX 50: DOWN 4.2 percent at 2,728.65
New York - Dow: DOWN 3.3 percent at 21,814.70
Tokyo - Nikkei 225: UP 3.9 percent at 19,389.43 (close)
Hong Kong - Hang Seng: UP 0.6 percent at 23,484.28 (close)
Shanghai - Composite: UP 0.3 percent at 2,772.20 (close)
Euro/dollar: UP at $1.1059 from $1.1031 at 2150 GMT
Dollar/yen: DOWN at 108.17 yen from 109.44 yen
Pound/dollar: UP at $1.2360 from $1.2204
Euro/pound: DOWN at 89.48 pence from 90.39 pence
Brent North Sea crude: DOWN 4.6 percent at $27.29 per barrel
West Texas Intermediate: DOWN 6.0 percent at $21.24
Stocks are on target for strong weekly gains
Governments and central banks have pledged trillions of dollars to support the global economy, which has been hammered by the rapid spread of the coronavirus