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Updated from 5:28 a.m. EST



) -- Asian stocks finished Friday with losses and European shares were lower following the U.S.

Federal Reserve's

announcement it was raising the discount rate.

The Fed said after the market closed Thursday it was

raising its discount rate

to 0.75% from 0.5%, effective Friday. The discount rate is the interest rate charged to commercial banks through the Fed's discount window.

The Nikkei 225 stock average in Tokyo closed Friday with a decline of 2.1% to 10,123.58. In Hong Kong, the Hang Seng led decliners across the region, falling 2.6%.

London shares fell 0.2% after rising at the start of trading Friday. Shares in Frankfurt and Paris fell 0.2% and 0.3%, respectively.

The Fed called its surprise move Thursday a "further normalization" of monetary policy as opposed to a change in policy or outlook. But the action spooked overseas investors who were left wondering if the rate hike might put a damper on rebounding U.S. consumer demand. Many Asian nations rely heavily on the sale of its goods to U.S. spenders.

Prior to the Fed announcement, the

Dow Jones Industrial Average

rose 83.66, or 0.8%, to 10,392.90 on Thursday. The

S&P 500



gained 0.7%.

Premarket futures suggested stocks would open lower Friday on Wall Street.

-- Reported by Joseph Woelfel in New York.

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