European stocks dropped Thursday, pulling back from a 21-month high, with the market coming under pressure as the euro marched higher in the wake of a lackluster economic outlook for the British economy.

U.S. stocks retreated Thursday as retail stocks slumped on disappointing earnings from Macy's Inc. M, -17.01% which weighed on the consumer discretionary sector. Performance of consumer discretionary stocks is often viewed as a reflection of consumers' confidence in the economy as companies in the sector manufacture non-essential goods that are sensitive to economic cycles.

Stock markets across Asia were broadly down early Friday, tracking overnight weakness in Europe and the U.S. amid disappointing earnings reports. In Japan, stocks were hit by 0.5% gain in the yen against the U.S. dollar over the last day, making the country's exports less competitive.