The Paris stock exchange plunged towards its worst week in more than two years on Friday, dragging down other European markets and the euro as investors fret over France's looming snap election.

Across the Atlantic, Wall Street's broad-based S&P 500 fell and tech-heavy Nasdaq was flat after hitting record highs, following news of slowing inflation and hopes of a Federal Reserve interest-rate cut later this year.

"Arguably, the weakness seen in European markets has created an excuse to do some selling," analyst Patrick O'Hare said.

European markets have been roiled by French President Emmanuel Macron's stunning decision Sunday to call legislative elections after his centrist alliance was trounced by Marine Le Pen's far-right National Rally in European Parliament elections.

Macron's election gambit has sparked a period of political uncertainty in Europe's second-biggest economy and across the European Union, where voting elsewhere saw a shift away from the centre.

Leading French left-wing politician Raphael Glucksmann on Friday threw his weight behind a new coalition of the left in the run-up to the historic elections, while Le Pen pledged a national unity government if her party wins.

XTB trading platform analyst Kathleen Brooks said there could be "more volatility" in the lead-up to the first round of the French elections on June 30. The second round will be held July 7.

"The risk of a win for Marine Le Pen and a shift in parliamentary power in France to the hard right is fuelling the selloff in French stocks, and the selloff in French banks in particular," she said.

The French capital's benchmark CAC 40 stocks index tanked by more than three percent in late afternoon deals Friday before paring back some losses.

It was down by almost seven percent for the week, marching towards its worst performance since March 2022 in the wake of Russia's invasion of Ukraine.

The Milan stock exchange sank more than three percent, while the Frankfurt DAX shed 1.5 percent. Outside the eurozone, London's FTSE 100 fell 0.2 percent.

The euro fell 0.5 percent against the dollar to $1.0669.

"It is all about the situation in France," Fawad Razaqzada, market analyst at City Index and, told AFP.

"The euro took a tumble amid ongoing political turmoil in France, something which also hurt European indices and undermined other risk-sensitive currencies," he said.

In another sign of investors' concerns about the snap election, the yield on 10-year French sovereign bonds rose and the difference with Germany's own borrowing costs widened the most in years.

"Soaring borrowing costs are already hitting the French government, as the perceived risk attached to a potential victory for the far right pushed the cost of sovereign debt higher," warned Shore Markets analyst Joshua Mahony.

In Asia on Friday, the yen dropped against the dollar and Japanese shares rose after the Bank of Japan said it would trim its vast hoard of government bonds as part of a cautious move away from its long-running ultra-loose monetary policy.

The central bank also kept interest rates unchanged after a two-day meeting.

- Key figures around 1455 GMT -

Paris - CAC 40: DOWN 2.8 percent at 7,489.15 points

Frankfurt - DAX: DOWN 1.5 percent at 17,996.09

EURO STOXX 50: DOWN 2.1 percent at 4,834.40

London - FTSE 100: DOWN 0.2 percent at 8,147.72

New York - Dow Jones: DOWN 0.5 percent at 38,438.91

New York - S&P 500: DOWN 0.3 percent at 5,417.49

New York - Nasdaq: FLAT at 17,663.69

Tokyo - Nikkei 225: UP 0.2 percent at 38,814.56 (close)

Hong Kong - Hang Seng Index: DOWN 0.9 percent at 17,941.78 (close)

Shanghai - Composite: UP 0.1 percent at 3,032.63 (close)

Euro/dollar: DOWN at $1.0687 from $1.0746 on Thursday

Euro/pound: UP at 84.34 pence from 84.15 pence

Dollar/yen: UP at 157.40 yen from 157.03 yen

Pound/dollar: DOWN at $1.2668 from $1.2766

West Texas Intermediate: UP 0.1 percent at $78.72 per barrel

Brent North Sea Crude: UP 0.2 percent at $82.91 per barrel