The pan-European STOXX 600 index closed down 1% in its worst session since Dec. 21, with losses accelerating after Wall Street stocks tumbled following big bank earnings. [.N]
The STOXX 600 logged a 0.8% weekly decline, its first weekly decline since mid-December.
Adding to worries, some EU nations are receiving fewer than expected doses of coronavirus vaccines as U.S. pharmaceutical firm Pfizer slowed shipments of the vaccine developed with German partner BioNTech. BioNTech shares dropped 2.2%.
German Chancellor Angela Merkel called for "very fast action" to counter the spread of coronavirus as the country saw a record number of virus-related deaths, while France said it would strengthen its border controls from Monday.
The German DAX dropped 1.4% and France's CAC 40 fell 1.2%. UK's FTSE 100 declined 1% despite data showing that Britain's economy recorded a smaller-than-expected contraction in November.
Mining and oil & gas sectors slumped 3.1% and 2.6%, respectively, after Chinese authorities put more than 28 million people under new lockdowns, raising concerns about demand from the major consumer of commodities.
Hopes of a large U.S. fiscal stimulus sent the STOXX 600 to a 11-month peak earlier this week, but markets retreated after U.S. president-elect Joe Biden outlined a $1.9 trillion proposal that raised worries of a tax hike.
"Market positioning had been quite aggressive, so I suppose it is a pause for breath," said Roger Jones, head of equities at London & Capital.
"The rollout and the speed of vaccination is becoming increasingly important and the market is willing to look through a period of extended lockdown if it's a relatively short period."
German business software group SAP closed down 0.7%, reversing early gains after it released preliminary annual results that came at the high end of guidance.
Siemens Energy AG fell 6.3% after General Electric Co accused a subsidiary of the power distribution company of using stolen trade secrets to rig bids for lucrative contracts.
French grocer Carrefour fell almost 3% after the French government all but killed off a possible $20 billion takeover by Canada's Alimentation Couche-Tard.
(Reporting by Amal S in Bengaluru; Editing by Saumyadeb Chakrabarty and Arun Koyyur)
By Amal S and Sruthi Shankar