LONDON: European shares fell on Thursday on worries about higher global inflation as well as a weakening US jobs market, while concerns about Greek debt hit banking stocks.
Investors were also positioned cautiously ahead of Google results, which are scheduled to be released after the markets close, with traders suggesting this could impact technology and media stocks.
The pan-European FTSEurofirst 300 index of top shares closed down 0.6 percent at 1,128.84 points after paring bigger losses. Volume was 106.3 percent of its 90-day average.
Investor sentiment was knocked after US claims for unemployment benefits bounced back above the key 400,000 level, while March US core producer prices data rose slightly faster than expected.
"There is a little bit of a setback in the market, with the US jobless claims and US PPI figures data. The key from here is to stick with companies that have pricing power," Veronika Pechlaner, a manager on the 100 million euro ($144 million) Ashburton European equity fund said.
Banks featured among the worst performers on market concerns that Greece would be forced to restructure its public debt, with the cost of insuring against a Greek sovereign default also rising to a record high.
The STOXX Europe 600 Banks index fell 1.5 percent, while Greek bank shares dropped 5 percent.
Banca Popolare di Milano lost 2.7 percent on media reports that the Bank of Italy has asked it to raise fresh capital above what was previously expected.
"Peripheries still have to contend with lower unemployment and a sluggish consumer. We do not really see upgrades coming through for the peripheries," Pechlaner said.
Stock markets in the peripheries fell, with Spain's IBEX 35 down 1.5 percent, Portugal's PSI 20 losing 1.6 percent and Italy's benchmark 1.2 percent lower.
Earlier, the market traded lower after Hong Kong media reported that China would post March inflation figures above analysts expectations on Friday, raising fears of further monetary tightening. "Inflation in emerging economies has become a serious issue, as the impact from high commodity prices is stronger for those countries," said Arnaud Scarpaci, fund manager at Paris-based Agilis Gestion, which has 80 million euros under management.
TECH STOCKS PRESSURED
Elsewhere, technology stocks were under pressure on continued worries about Japan's March 11 earthquake and tsuanami on supply chains after Sony Corp said it is mulling a two-week summer shutdown to save energy.
Ericsson, which has shut down factories, fell 3.2 percent, while ASML continued its falls from the previous session, down 2.9 percent, when the Dutch chip equipment maker said it saw an impact from Japan on customers.
British consumer goods group Reckitt Benckiser dropped 7.5 percent after its chief executive officer Bart Becht said he is to retire.
Across Europe, the FTSE 100 index was down 0.8 percent, Germany's DAX lost 0.4 percent and France's CAC 40 fell 0.9 percent.