European shares ended sharply lower on Wednesday as risk appetite waned after data showed a slowdown in US manufacturing activity in May and a much lower than expected increase in US private sector employment.
The Euro STOXX 50 volatility index, one of Europe's main barometers of market sentiment, rose as much as 5.5 percent before paring some gains, suggesting a fall in appetite for equities. Charts indicated the market would be trapped in a range for the next trading sessions.
The FTSEurofirst 300 index of top European shares ended 1 percent lower at 1,131.01 points after falling to a low of 1,128.16 earlier in the session.
Energy shares featured among the top decliners, with the STOXX Europe 600 oil and gas index down 1.5 percent, as the economic numbers weighed on the demand outlook for crude.
The US Institute for Supply Management's index of national factory activity fell to 53.5 in May from 60.4 the month before, against economists' expectations for 57.7.
Private-sector US job growth also tumbled to just 38,000, its lowest in eight months, prompting economists to slash their forecasts for Friday's closely watched US payrolls report. The Euro STOXX 50, the eurozone's blue chip index, was down 1.2 percent at 2,827.66 points. It fell below its 200-day moving average after failing to break its resistance at 2,873.
Financial companies, which generally gather strength from a rise in economic activity, lost ground. The STOXX Europe 600 banking index fell 1.4 percent, while KBC was down 6.2 percent.
Italy's Banca Monte dei Paschi di Siena fell 7.6 percent after its main owner, the Foundation Monte Paschi, sold 450 million preference shares.
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