European stocks fell Friday before key US budget talks as US President Barack Obama attempts to avert a looming "fiscal cliff" of automatic taxation hikes and spending cuts in the world's biggest economy.
In late morning deals, London's benchmark FTSE 100 index of top companies shed 0.63 percent to 5,642.15 points, Frankfurt's DAX 30 index slid 0.74 percent to 6,991.97 points and in Paris the CAC 40 dropped 0.46 percent to 3,366.94.
The European single currency weakened to $1.2731 from $1.2778 late in New York on Thursday. Gold prices eased to $1,709.29 an ounce from $1,710 on the London Bullion Market.
In Wall Street action on Thursday, New York's Dow Jones Industrial Average lost 0.23 percent on doubts that a US budget deal can be done, dealers said.
"Stock markets are lower in Europe ahead of Barack Obama's first meeting with congressional leaders regarding the fiscal cliff," said analyst Craig Erlam at trading group Alpari.
"Expectations are understandably low regarding a positive outcome from the first meeting. These talks are likely to go on for weeks before they come to any kind of agreement.
"Both parties are standing firm on key issues ahead of the first talks which is going to make an agreement unlikely and therefore the stock markets unstable."
If the "fiscal cliff" package of measures comes in as planned on January 1 the world's number one economy will likely tip back into recession, which would have a devastating effect globally.
Erlam warned: "The fiscal cliff has taken over the eurozone recently as the greatest threat to the global recovery, which at best is gradual and very fragile."
On the corporate front, shares in London Stock Exchange Group fell 0.22 percent to 928 pence after the company posted flat first-half net profits, despite rising sales, as it grappled with "challenging" market conditions.
The operator of the London Stock Exchange and Italy's Borsa said profit after tax stood at £116.0 million ($184 million, 144 million euros) in the six months to September, compared with £116.1 million in the same part of last year.
European shares had fallen on Thursday following news that the 17-nation eurozone economy fell into recession in the third quarter as a result of the region's sovereign debt crisis, dealers said.
The eurozone's gross domestic product (GDP) shrank by 0.1 percent in the three months to September from the previous quarter, when it contracted 0.2 percent.
And Germany, Europe's biggest economy and the crucial engine for growth in the currency bloc, expanded by just 0.2 percent.
Asian markets traded mixed Friday as eurozone and US woes dented confidence, but Tokyo posted strong gains for a second straight session as the yen weakened further.
Hong Kong stocks climbed 0.24 percent, Tokyo surged 2.20 percent and Seoul was 0.53 percent lower, while Shanghai shed 0.77 percent and Sydney closed down 0.29 percent.
Tokyo's Nikkei index soared as the yen continued to be sold off following comments from the frontrunner to be the country's next prime minister that he would push for unlimited monetary easing.
Shinzo Abe, a former prime minister and now leader of the Liberal Democratic Party, said he would seek more control of the central bank and push for strong stimulus measures to spur the economy.
Japan's Prime Minister Yoshihiko Noda has dissolved the lower house of parliament Friday for an election on December 16, in a political gamble widely expected to strip his centre-left party of power.
Japanese lawmakers have meanwhile approved a deficit-financing bill allowing the government to issue bonds to cover its debts this financial year, without which Japan would have effectively run out of money at the end of this month.