Frankfurt's DAX 30 sinks 2.42 percent to 9,982.20 points in morning trade
London - AFP
Europe's stock markets and the dollar sank Friday after the US Federal Reserve held fire on what would have been its first rate hike in nine years.
Sentiment was also weighed down ahead of this weekend's looming election in Greece, with the Athens market losing about 1.0 percent.
"After all the build-up it was arguably a bit of a disappointment that the Fed chose to leave rates as they are," said Spreadex analyst Connor Campbell.
"Not only that, but Janet Yellen’s statement was seen by many as more dovish than expected, with the chance that the central bank now won't move until 2016."
In late morning deals, London's FTSE 100 index dropped 0.80 percent to 6,137.20 points.
In the eurozone, Frankfurt's DAX 30 sank 2.42 percent to 9,982.20 points and the CAC 40 in Paris shed 2.28 percent to 4,549.10 compared with Thursday's close.
The Federal Reserve held its key interest rate locked near zero Thursday, citing worries about how the slowdown in China will hit the US economy.
Fed Chair Janet Yellen said the economy continues to grow moderately and that a rate increase could still take place before the end of the year.
However, policymakers were still focused on the spillover from China's troubles and those in other major emerging market economies.
The dollar continued to slide against the European single currency, having also tumbled the previous day after the Fed news.
The euro jumped to $1.1460 -- the highest since August 26 -- in Friday morning London deals. That compared with $1.1436 late in New York Thursday.
In contrast to equity losses witnessed in Europe, most Asian markets reaped gains on Friday.The US central bank's decision to hold off hiking interest rates sent emerging market currencies and most Asian indices advancing, as concerns eased over an outflow of cash as the global economy suffers a painful slowdown.
However Tokyo fell 1.96 percent. With the Dow Jones Industrial Average having given up 0.39 percent and the broad-based S&P 500 sliding 0.26 percent on Thursday, markets in most advanced nations have fallen since the US rate decision.
The Fed's decision followed widespread warnings about the dire impact a rate increase could have, with the World Bank predicting this week it would cause a "perfect storm" in financial markets.
It also came despite a string of data in recent months showing the US economy, the world's biggest is well on track to recovery.
When the US economy began to stall in 2007, the Fed slashed the rate in 10 steps from 4.75 percent in September 2007 to an unprecedented low of 0-0.25 percent in December 2008.
It held the rate locked near zero level as a way of getting the economy back to health after the deepest recession in eight decades.
The path of American interest rates is critical for global financial markets because the United States is the world's biggest economy.
Many countries peg their currencies to the dollar and many companies borrow in dollars, while international trade flows also tend to be denominated in the US unit.