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Both Frankfurt and Paris fell by around one percent after data from a closely watched survey showed that Brexit and trade war fears drove eurozone business growth to its lowest level in six years in September.
IHS Markit's composite eurozone PMI, seen as a key indicator of business confidence, fell to 50.4 in September, down from 51.9 in August - the lowest reading since June 2013.
It warned that the single currency area's economy was "close to stalling".
Market analyst David Madden at CMC Markets UK said "disappointing manufacturing and services reports from France, in addition to Germany, has weighed on European stock markets."
Investors now need to weigh "German recession odds against central bank support", added Fawad Razaqzada, market analyst at Forex.com.
The euro also slid lower.
THOMAS COOK FALLOUT
Some rivals of British travel giant Thomas Cook, which declared bankruptcy after last-ditch re-financing attempts failed, saw their shares rise sharply.
TUI shares, listed in London, shot six per cent higher.
Ryanair gained 1.4 per cent and easyJet 4.5 per cent, but British Airways parent IAG shed 1.3 per cent.
In Hong Kong, China's Fosun International lost 1.5 per cent after the collapse of Thomas Cook, in which it is the top shareholder.
The price of oil rose after Iran warned the presence of US forces in the Gulf was causing instability in the region.
Meanwhile the pound sank against the dollar at the start of a crucial week for Britain with the Supreme Court to decide whether Prime Minister Boris Johnson acted legally in suspending parliament for an extended period as he pushes for Brexit on Oct 31.
'HOT AND COLD'
Stock markets were also buffeted after President Donald Trump ruled out a partial trade deal with China, casting fresh doubt on any early agreement.
"Investors remain unconvinced that a trade deal is about to see the light of day soon, and that's likely to put a cap on any further gains in risk assets," said Hussein Sayed, chief market strategist at FXTM.
"I'm not looking for a partial deal. I'm looking for a complete deal," Trump told reporters at the White House.
He added that he did not see the need for an agreement before the 2020 presidential election.
The remarks tempered recent optimism on the talks and the possibility of a quick piecemeal deal, though they came as China hailed progress in preparatory discussions ahead of a planned high-level meeting next month.
"The hot and then cold and then hot and cold again US-China trade vibes continue to rattle markets," said Rodrigo Catril at National Australia Bank.
US stocks were largely flat in late morning trading.
Key figures around 1530 GMT:
London - FTSE 100: DOWN 0.3 per cent at 7,326.08 points (close)
Frankfurt - DAX 30: DOWN 1.0 per cent at 12,3 (close)
Paris - CAC 40 DOWN 1.1 per cent at 5,630.76 (close)
EURO STOXX 50 - DOWN 0.9 per cent at 3,539.27
Tokyo - Nikkei 225: Closed for a public holiday
Hong Kong - Hang Seng: DOWN 0.8 per cent at 26,222.40 (close)
Shanghai - Composite: DOWN 1.0 per cent at 2,977.08 (close)
Euro/dollar: DOWN at US$1.0996 from US$1.1021 at 2100 GMT
Pound/dollar: DOWN at US$1.2437 from US$1.2476
Euro/pound: UP at 88.44 pence from 88.33 pence
Dollar/yen: DOWN at 107.47 yen from 107.56
Brent North Sea crude: UP 29 cents at US$64.57 per barrel
West Texas Intermediate: UP 37 cents at US$58.46 per barrel