At the close of European trade, the EURO STOXX 50 plunged 3.00%, France’s CAC 40 fell 2.68%, while Germany’s DAX 30 gave back 2.20%.
gniting the bearish sentiment, ECB President Mario Draghi said the bank may undertake bond purchases in order to bring down the "exceptionally high" borrowing costs of stressed euro zone members, but provided no explicit details on how and when these activities may be carried out.
Draghi added that any such action by the ECB was conditional on euro zone governments experiencing difficulty on bond markets activating the bloc’s bailout funds to purchase government bonds and accepting strict conditions and supervision.
The statement quashed market expectations for bold steps to counter the debt crisis, which have been building since Draghi pledged last week to do whatever is necessary to preserve the euro.
Meanwhile, Spain successfully auctioned EUR3.13 billion of government bonds, the top end of the targeted range, but borrowing costs were higher while demand was weaker.
Following the auction, the yield on Spanish 10-year bonds dropped back to an intra-day low of 6.64%, while the yield on Italian 10-year bonds rose to 5.82%.
Financial stocks pushed higher, led by France’s BNP Paribas and Societe Generale, up 2.80% and 2.54%, while German lenders Deutsche Bank and Commerzbank climbed 1.22% and 1.57% respectively.
Earlier in the day, BNP Paribas posted a less-than-expected 13% drop in second-quarter profit, as the euro zone’s debt crisis curbed trading revenue.
Meanwhile, courier company Deutsche Post surged 4.16% after it posted earnings of EUR543 million, above estimates.
On the downside, France-based Veolia dove 10.30% after saying it intends to cut investments by EUR500 million euros this fiscal year, in order to confirm full-year forecasts. The company also posted a first-half net income of EUR153 million, compared with a loss of EUR67 million a year earlier.
In London, FTSE 100 dropped 0.88%, after the Bank of England left the benchmark interest rate unchanged at 0.5% and kept the size of its quantitative easing program at GBP375 billion.
Medical devices specialist Smith & Nephew remained one of the session’s top gainers, with shares rallying 2.81% amid reports the company ramped up its dividend as it embarks on a progressive dividend policy on the back of the success of its recent restructuring.
Oil and gas giant BP also contributed to gains, climbing 1.53%, although the group reported a sharp drop in second quarter profits, from USD5.4 billion to USD238 million, due to impairment charges and the decision not to proceed with a flagship drilling project off Alaska.
Elsewhere, U.K. lenders remained mixed. Shares in Barclays rallied 1.35% and HSBC Holdings jumped 1.10%, while Lloyds Banking and the Royal Bank of Scotland declined 0.33% and 2.14% respectively.
In the U.S., equity markets followed lower with the Dow down 1.14%, the broad based S&P 500 off 1.19% and the tech heavy Nasdaq giving back 0.70% in midsession trade.
Also Thursday, government data showed that the number of unemployed people in Spain declined by 27,800 in July after dropping by 98,900 the previous month.
Investors are anxiously awaiting the non farm payrolls and ISM non manufacturing index from the U.S. on Friday.
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