European stock markets dropped to the lowest level in a month as European Central Bank President Mario Draghi said the euro zone was at risk of a deeper recession.
The Stoxx Europe 600 index fell 1.05% to close at 291.71, after losing 0.9% on Wednesday. The index was still up 4.3% so far this year, boosted by aggressive monetary easing from central banks.
More- Heard on the Street: ECB Under Growing Pressure
The U.K.'s FTSE 100 fell 1.2% to 6344.12, Germany's DAX slipped 0.7% to 7817.39 and France's CAC-40 finished down 0.8% at 3726.16.
"Anybody who got into the market last autumn could think this was the time to take some profits," said Peter Dixon, a strategist at Commerzbank .
Central banks grabbed most of the attention Thursday. Both the European Central Bank and the Bank of England kept rates at record lows, but the Bank of Japan unveiled a broad and surprisingly aggressive easing plan. The ECB left rates at 0.75%, while the BOE maintained a 0.5% lending rate, as expected.
Speaking at the ECB's monthly news conference, Mr. Draghi acknowledged that the recovery in the second half of the year is still at risk of being thrown off course.
Also adding to the downbeat sentiment, initial claims for unemployment benefits in the U.S. increased by 28,000 to 385,000. Economists expected a smaller increase, so the news tempered investors' expectations about employment figures the U.S. is scheduled to make public on Friday.
In Europe, the Markit purchasing managers' index for the services sector fell to 46.4 from 47.9 in February, slightly below a preliminary reading of 46.5.
Shares of Alcatel-Lucent rose 7.5% in Paris, as Deutsche Bank lifted the telecom-equipment firm to "buy" from "hold."
Publicis Groupe added 0.9%, as Nomura lifted the advertising firm to buy from "neutral," citing potential growth in the digital business.
Oil firms fell as crude prices declined. BP shaved off 2.1% and BG Group fell 0.9%. Royal Dutch Shell fell 1.2%, as it said it plans to sell its oil refinery in Australia amid struggles to compete with low-cost operators in Asia.
Germany steelmaker ThyssenKrupp lost 3.3%,as Morgan Stanley said 2013 will be much tougher for the sector than the market currently expects.
"We see the sector moving into its next phase with increasing risk of cash burn, and maintain our cautious view," the analysts said.
As European markets closed, light, sweet crude oil for May delivery on the New York Mercantile Exchange was at $92.72 per barrel, down 1.8%. Oil fell 2.8% Wednesday on news that U.S. crude-oil stocks climbed to their highest level for the end of March since 1931. Gold for April delivery on Nymex's Comex division slipped 0.3% to $1,548 a troy ounce.
Write to Andrea Tryphonides at andrea.tryphonides@dowjones.com
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