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Europe Closes Lower on Renewed China Fears

European shares closed lower on Wednesday on worries about slowing growth and rumors of a credit downgrade for Germany curbing investor sentiment.

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IBEX 35
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The FTSEurofirst 300 Index closed provisionally down 1.5 percent at 1,147.92 points, having fallen as low as 1,144.89 points during the session. Wednesday marks the pan-European index's fourth consecutive day of losses, and its biggest four-day slump in nine months.

Fears about a China slowdown resurfaced on Wednesday after the Financial Times reported that a senior auditor in China had warned that local government debt is "out of control" and could spark a bigger financial crisis than the U.S. housing market crash. The report comes after disappointing growth numbers from China on Monday sparked a sell-off in commodities, which fed through to global equities.

U.K.-listed miners, with their high exposure to China, posted heavy declines, with Fresnillo and Kazakhmys closing more than 7 percent down. Lonmin closed over 5 percent lower and Glencore clocked up losses of more than 2 percent.

(Read More: Has China's Economy Hit a 'Dead End'?) The German DAX closed down 2.3 percent as rumors of a sovereign credit downgrade sent shares lower. However, ratings agency Fitch told CNBC the firm would not be downgrading Germany on Wednesday.

"There was speculation of a German downgrade. More broadly markets have shown rising signs of instability recently with gold volumes reaching levels last seen during the subprime crisis," Sebastien Galy, senior currency strategist at Societe Generale, told CNBC.

Meanwhile, the Bank of England released minutes from its latest monetary policy committee meeting that showed members were once again split as to whether to increase the asset purchasing program that currently totals 375 billion pounds.

In stocks news, Britain's biggest retailer, Tesco, wrote down the value of its global operations by $3.5 billion and announced plans to exit the U.S., after a year in which profit fell for the first time in two decades.Tesco shares closed nearly 4 percent lower on Wednesday.

German car maker Daimler announced that it was selling its remaining 7.5 percent stake in aeronautics firm EADS; shares in both companies rallied. However, auto stocks largely underperformed on Wednesday, after bleak European car sales figures were released for March.

Shares in oil companies Royal Dutch Shell, Total, Tullow Oil and other oil companies closed sharply lower after a well in offshore French Guiana failed to show significant hydrocarbons.

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FTSE EUR 300
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