Europe open: Stocks follow US and Asian markets lower, Diageo plummets

European stocks declined on Friday morning, following losses on Wall Street and on Asian indices overnight, after the head of Federal Reserve opened the doo

The pan-European Stoxx 600 Index was down 0.7% by 0846 GMT, with similar losses registered across London, Paris, Frankfurt and Milan – though Madrid's Ibex 35 was outperforming to trade more or less flat.

US stocks finished firmly lower on Thursday evening, with the S&P 500 snapping an eight-day winning streak – its longest run in two years – after Fed chair Jerome Powell refrained from calling time on interest-rate hikes, saying that tighter monetary policy could be necessary if inflation doesn't come down towards the target. Markets across Hong Kong, Tokyo and Shanghai also saw heavy selling pressure.

"We know that ongoing progress toward our 2% goal is not assured. Inflation has given us a few head fakes," Powell said, adding: "If it becomes appropriate to tighten policy further, we will not hesitate to do so."

Expectations had risen in the past week that the rate-hiking cycle might be over, causing yields on 10-year US Treasuries to plunge to 4.5%, after hitting a 16-year high of 5% last month.

"Rate volatility is in charge," said analyst Neil Wilson from Markets.com. "Wall Street snapped a hot streak as bond yields jumped sharply on a bit of a pushback from Fed chair Jay Powell – no doubt alarmed by the swift repricing in the market in the last week."

In economic news on Friday, figures released by the Office for National Statistics showed that UK GDP was unchanged in the three months to September, versus consensus expectations for a 0.1% contraction. For the month of September, GDP rose 0.2% on the month following 0.1% growth in August, which was revised down from 0.2%. Economists were expecting no growth.

Diageo drags drink stocks lower

UK-listed drinks giant Diageo saw shares plummet 12% after saying it expects to see a slowdown in growth in the first half due to a weaker performance in Latin America and the Caribbean.

Latin America and the Caribbean, one of its five key regions which accounts for 11% of group net sales values, is now expected to see an organic net sales decline of more than 20% in the second half compared with last year.

European drinks peers AB Inbev, Heineken, Carlsberg, Pernod Ricard, Royal Unibrew and Campari Group were all trading lower.