European stocks hold firm after Fed-driven slump

European stock markets edged higher in opening deals on Friday, as investors paused after a steep slump on Thursday driven by the Federal Reserve's plans to cut easy-money stimulus.

In initial trading, London's benchmark FTSE 100 index added 0.50 percent to 6,190.47 points, Frankfurt's DAX 30 gained 0.23 percent to 7,946.32 points and in Paris the CAC 40 advanced 0.59 percent to 3,720.70.

"Markets are expected to rebound today, as investors ... go bargain hunting," said Gekko Markets trader Anita Paluch.

"The real interesting question though is, how big the rebound is going to be. So far the mood is mildly up, markets have calmed, but remain sceptical."

All three main indices had tumbled on Thursday by around 3.0 percent after the Fed signalled it may begin winding down its massive bond-buying policy, known as quantitative easing.

Investor sentiment was also rocked by more poor Chinese economic manufacturing data.

"European markets opened cautiously today after optimism was dealt a severe blow as investors continued to grapple with the announcement that stimulus measures from the US could end in the middle of 2014," said Spreadex trader Shavaz Dhalla.

"Investors seemed to be astonished by the announcement despite the fact that officials have been alluding to the possibility in recent times."

Asian markets mostly fell further Friday, extending a sell-off in line with steep losses on Wall Street after the Fed news.

However, early losses in Tokyo were reversed thanks to a surging dollar, which began heading back towards the 100 yen level.

The losses are part of a global correction in equities and commodities, which have enjoyed strong rallies since the Fed unveiled its bond-buying scheme in September.

Tokyo began the day two percent lower, extending Thursday's slump, but it reversed course in the afternoon thanks to the dollar rally and closed 1.66 percent higher.

Sydney fell 0.41 percent, while Seoul tumbled 1.49 percent.

Hong Kong lost 0.10 percent and Shanghai was off 0.16 percent. Chinese shares pared earlier losses after reports the country's central bank had pumped billions of dollars into several lenders to ease a liquidity crisis.

Worries over China's economic slowdown and the possible end to the Fed's stimulus also sent Wall Street into a tailspin.

New York's Dow Jones Industrial Average lost nearly 354 points, or 2.3 percent, to finish at 14,758.32 points on Thursday.

That was the blue chip index's largest points loss since November 9, 2011.

For the US markets, the plunge followed one percent losses on Wednesday sparked by Chairman Ben Bernanke's statement that the Fed could begin pulling back its $85 billion-a-month stimulus program late this year and wind it up by mid-2014.