Europe Markets

DAX closes down over 3%; Europe sells off as euro gains

DAX closes down 3%; Europe sells off after US GDP

European equities tumbled on Wednesday to close sharply lower as investors reacted to sharp gains in the euro against the dollar and awaited the outcome of a two-day meeting of the U.S. Federal Reserve.

The pan-European Euro Stoxx 600 Index finished more than 2 percent lower, with major bourses slumping as the trading session progressed.

Data disappoints

An employee talks on the phone as he views trading screens at the offices of Panmure Gordon and Co.
Getty Images

The German DAX index provisionally ended more than 3 percent lower, in its biggest one-day percentage drop since March 2014, according to Reuters. .

This followed a rally in the euro-dollar to $1.11, after weaker than forecast U.S. first quarter economic data. This came in at an annualized 0.2 percent versus estimates of 1.0 percent.

The Dow Jones Industrial Average briefly fell 150 points after the data, before recovering somewhat.

In Europe, exporting firms such as pharmaceuticals and autos were hit hard by the rally in the euro, with Merck falling close to 5 percent and Bayer and automaker Volkswagen both off over 3 percent.

A failed bond auction in Germany also weighed on sentiment, with yields surging on fixed income assets.

Read MoreGermanyields spike; shrug off negative yield fears

Plus, an euro zone economic, business and industrial sentiment index showed a fall to 103.7 in April from 103.9 in March on Wednesday morning, according to the European Commission.

In individual stocks news, U.K. retailer Next saw its shares rise 2.3 percent after its sales report managed to beat its guidance.

Shares of Barclays slipped around 1.5 percent after the lender announced it was setting aside another £800 million ($1.23 billion) for fines over past misconduct.

Read MoreBarclays sets aside further £800M for forex fines

Meanwhile in the U.S., the Federal Reserve concludes a two-day policy meeting and is due to give a statement on interest rates at 7 p.m. London time on Wednesday. The central bank is considering monetary policy at a time when the U.S. economy has hit a soft patch, largely blamed on harsh winter weather and the strong dollar.

Follow us on Twitter: @CNBCWorld