Europe Markets

Europe stocks close lower on Fed, ECB worries

European equities closed lower on Thursday as investors grew concerned about deflation risk in the euro zone, and as strong data from the U.S. increased worries regarding when the Federal Reserve may taper its stimulus program.

The pan-European provisionally closed down 0.9 percent at 1,262.18 points. Britain's fell for a fifth straight day, its longest losing streak since March. The FTSE has sunk nearly 5 percent from October's peak of 6,819.

The European Central Bank (ECB) on Thursday left its benchmark interest rate unchanged at 0.25 percent as expected, after surprising markets with a rate cut last month.

It also kept its forecast for an economic contraction of 0.4 percent in the euro zone in 2013. For 2014, it expects growth of 1.1 percent, a slight improvement on the 1.0 percent seen in September. For 2015 it forecast growth of 1.5 percent.

At a press conference, ECB President Mario Draghi said that risks to its economic outlook remained on the downside. He also warned the euro zone could face a lengthy bout of low inflation.

"We may experience a prolonged period of low inflation, to be followed by a gradual upward movement towards inflation rates below, but close to, 2 percent on," Draghi said. The ECB's inflation target 2 percent.

The ECB sees inflation at 1.4 percent in 2013, 1.1 percent in 2014 and 1.3 percent in 2015 — well below its target of close to 2 percent. Both the 2013 and 2014 inflation forecasts have been revised down slightly since September.

(Read More: ECB leaves rates at 0.25%, focus moves to forecasts)

Meanwhile, the Bank of England left its main interest rate and monetary stimulus program unchanged on Thursday, as the country's finance minister delivered his bi-annual state of the economy address.

The central bank's Monetary Policy Committee opted to keep its interest rate at a record low of 0.5 percent, and left its asset purchase total at £375 billion ($613 billion).

(Read More: BoE holds fire after growth forecast upgrades)

Fed fears continue

Strong U.S. data continued to raise uncertainty over when the Federal Reserve may taper its stimulus program.

The U.S. economy grew faster than initially estimated in the third quarter as businesses aggressively accumulated stock, but underlying domestic demand remained sluggish. Separate data on Thursday showed the number of Americans filing new claims for unemployment benefits unexpectedly fell last week, a hopeful sign for the labor market recovery.

Gross domestic product (GDP) grew at a 3.6 percent annual rate instead of the 2.8 percent pace reported earlier, the Commerce Department said on Thursday. Economists polled by Reuters had expected output would be revised up to only 3.0 percent.

(Read more: Gangbuster! US growth surges, joblessness plunges)

U.S. stocks traded lower on Thursday after the day's data.

Merck receives Apple bounce

In stocks news, shares of recycled packaging manufacturer closed higher by around 4.0 percent after reporting a profit increase of 52 percent in its first-half trading period.

German chemicals group provisionally closed higher by 4.9 percent after it agreed to buy AZ Electronic Materials which makes chemicals used in Apple iPads.

Danish bank posted the worst declines on the . The bank has announced it will increase its writedowns after an inspection by the country's regulators; shares closed down roughly 4.5 percent.

German retailer group received a downgrade to "equal-weight" from Morgan Stanley; shares closed down around 4.8 percent.

Shares of French lander were 1.7 percent lower after agreeing to buy Rabobank's Polish unit for $1.4 billion.

Credit Suisse shares were 1.2 percent lower after announcing it will sell its German private bank to ABN Amro's Bethman Bank.

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