European Markets Continue Slide

European shares kept falling Friday, with investors disappointed on U.S. stimulus measures, and banks lower after Goldman Sachs downgraded target prices across the sector.

At 0929 GMT, the FTSEurofirst 300 index of top European shares was down 1 percent at 930.51 points. The STOXX Europe 600 Banking Index fell 2.1 percent.

The markets reacted negatively after Federal Reserve Chairman Ben Bernanke gave no clear indication on new stimulus measures and as a $447 billion U.S. jobs package failed to lure investors back into equities.

The euro also fell to a two-month low after the region's festering debt crisis forced the European Central Bank to change course away from further rises in interest rates, a key driver in the single currency's rally this year.

European stocks snapped a two-day recovery spurred by speculation that Bernanke would signal new stimulus plans to support the economy. His speech kept the door open for the Fed to do so but stopped short of signaling it would take the plunge.

Equity markets were also concerned that President Barack Obama's proposed $447 billion package of tax cuts and spending plans aimed at boosting growth and job creation could be hamstrung by political wrangling when it goes to Congress.

Investors are holding back...There isn't any reason to commit until you can see credible policies, Justin Urquhart Stewart, director at Seven Investment Management, said.

Bernanke was never going to say anything. He made it clear at Jackson Hole he was pushing it back to the politicians. Obama has come up with this stimulus package. We now have to digest what effect this will have, assuming it is passed.

Market confidence has been fragile this week due to growing concerns over the global economy and Europe's debt crisis, with a looming deadline for bond holders to decide on Greece's swap offer adding to the nervousness.

G7 finance chiefs meet later Friday, with the faltering global recovery and Europe's problems likely to be the issues of the day.

The fragile tone in riskier assets kept safe-haven German government bonds well-bid, with Bund futures up 40 ticks at 136.85 and benchmark U.S. T-note yields hovering within striking distance of 1.908 percent, its lowest in 60 years hit Tuesday.

The euro was a touch down against the dollar on the day at $1.3876 and analysts saw more downside as sentiment stays negative after the ECB dropped its tightening bias and investors believe a lasting solution to euro zone debt crisis remains elusive.

The ECB has now left the door open for an easing of policy and there are more downside risks to come for the euro with Greek PSI (private sector involvement) to be finalized and ratification of the EFSF still required. said Kiran Kowshik, currency strategist at BNP Paribas.