Global stock markets retreated Friday along with the pound, as investors focused on long-running US stimulus talks on Capitol Hill and whether Britain and the European Union can finally agree to a post-Brexit trade deal.
Major US indices pulled back from Thursday's records as markets awaited resolution of congressional talks on another relief package for the coronavirus-ravaged US economy.
Lawmakers have said negotiations are in the home stretch, but there was still no deal Friday evening ahead of a midnight deadline to avert a government shutdown.
"While there's a lot of optimism about stimulus, it's important not to count on it," said TD Ameritrade's JJ Kinahan in a note Friday morning.
"It's easy to see things going south and the market taking it pretty hard, with so much stimulus premium already built in. Hope for the best, but prepare for the worst, as the saying goes."
Republicans and Democrats braced for possibly working through the weekend to conclude a $900 billion deal aimed at providing emergency relief for millions of struggling families and businesses amid signs of a worsening economy and as the country sees record high death tolls from the coronavirus pandemic.
Still, many analysts remain hopeful.
"While the stimulus saga is still not over, the two sides will likely strike a deal before the end of the year," said Gorilla Trades strategist Ken Berman.
Meanwhile, British and EU negotiators took their grueling quest for a post-Brexit trade deal into the weekend after failing again on Friday to resolve the highly-charged issue of fishing rights.
The pound was under pressure, while bourses in Paris, Frankfurt and London all fell.
"This week ends just like last week with the market focused on an apparent Sunday deadline to approve a Brexit deal," remarked AJ Bell investment director Russ Mould.
Sterling has fallen "as government ministers and (British Prime Minister) Boris Johnson himself have appeared to pour cold water on the prospects of a deal," said Mould.
"Overall though investors are seeing this as bluster intended to enable the UK side to claim victory in the negotiations assuming an agreement is eventually brokered," he added.
The UK will leave the EU single market in less than two weeks and time has all but run out for an agreement to be approved that heads off a severe economic shock.
Meanwhile, German business confidence unexpectedly rose in December, a key survey showed, even as the country ends the year back under a new lockdown to curb a second coronavirus wave.
- Key figures around 2215 GMT -
New York - Dow: DOWN 0.4 percent at 30,179.05 (close)
New York - S&P 500: DOWN 0.4 percent at 3,709.41 (close)
New York - Nasdaq: DOWN 0.1 percent at 12,755.64 (close)
London - FTSE 100: DOWN 0.3 percent at 6,529.18 (close)
Frankfurt - DAX 30: DOWN 0.3 percent at 13,630.51 (close)
Paris - CAC 40: DOWN 0.4 percent at 5,527.84 (close)
EURO STOXX 50: DOWN 0.4 percent at 3,545.74 (close)
Tokyo - Nikkei 225: DOWN 0.2 percent at 26,763.39 (close)
Hong Kong - Hang Seng: DOWN 0.7 percent at 26,498.60 (close)
Shanghai - Composite: DOWN 0.3 percent at 3,394.09 (close)
Pound/dollar: DOWN at $1.3531 from $1.3585 at 2200 GMT
Euro/pound: UP at 90.66 pence from 90.30 pence
Euro/dollar: DOWN at $1.2250 from $1.2268
Dollar/yen: UP at 103.28 yen from 103.11 yen
West Texas Intermediate: UP 1.5 percent at $49.10 per barrel
Brent North Sea crude: UP 1.5 percent at $52.26 per barrel