By Peter Nurse

Investing.com - European stock markets traded sharply lower Friday, on renewed fears that aggressive monetary tightening will result in a global recession.

By 03:55 ET (07:55 GMT), the DAX in Germany traded 1.8% lower, the CAC 40 in France fell 1.4%, and U.K.’s FTSE 100 dropped 0.4%.

Warnings of an impending global economic slowdown by both the World Bank and the International Monetary Fund have hit sentiment Friday, with Indermit Gill, the World Bank's chief economist, saying he was concerned about "generalized stagflation," a period of low growth and high inflation.

Further evidence of this slowdown emerged Friday as U.K. retail sales posted their sharpest fall of the year so far in August, dropping 1.6% on the month and 5.4% on the year.

The figures were well below analysts' expectations for a drop of 0.5% on the month and 4.2% on the year and add to a picture of an economy sliding quickly into recession.

Attention will turn to the release of Eurozone CPI data for August, at 05:00 ET (09:00 GMT), which is expected to climb 0.5% on the month, up 9.1% on the year.

The European Central Bank hiked its key interest rates by a historic 75 basis points last week, and signaled more hikes ahead as the policymakers attempted to get on top of these soaring prices.

In corporate news, Uniper (ETR:UN01) stock fell 12% with Germany close to taking a controlling stake in the struggling gas importer, potentially paving the way for a full nationalization of the firm.

Germany also placed the German subsidiary of Russian oil giant Rosneft under trusteeship on Friday, handing control of the PCK refinery in Schwedt to the federal regulator.

Oil prices stabilized Friday after the previous session’s hefty losses, but were headed for a third straight week of losses on fears that aggressive monetary tightening will hit global growth and thus fuel demand.

The crude market has also been hit by a strong U.S. dollar in the wake of the hot U.S. inflation data, which makes oil more expensive for buyers using other currencies.

By 03:55 ET (07:55 GMT), U.S. crude futures traded 0.2% lower at $84.97 a barrel, while the Brent contract rose 0.1% to $90.94. Both contracts tumbled around 4% on Thursday, and were set to lose nearly 2% for the week.

Additionally, gold futures fell 0.8% to $1,663.80/oz, while EUR/USD traded 0.4% lower at 0.9957.

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