The pan-European STOXX 600 index closed 0.7% lower, led by the travel and leisure, banking and insurance sectors.

Investors were relieved after the Fed raised interest rates by 50 basis points on Wednesday, with Chairman Jerome Powell explicitly ruling out a 75 basis point hike in a coming meeting, but the rally in European stocks faded just as Wall Street opened lower on Thursday. [.N]

"European equity markets were firmly in positive territory this morning, but the aggressive move lower in the U.S. is hurting stocks on this side of the Atlantic," said David Madden, market analyst at Equiti Capital.

"It seems that fears about lower growth in the U.S. are still in circulation despite the Fed not acting excessively hawkish."

Worries about quicker interest rate increases, China's COVID lockdowns, the Ukraine conflict and surging inflation have all weighed on stock markets this year, dragging the STOXX 600 down more than 10% so far.

"The rise in energy prices and inflation happened quite quickly and that's taken people by surprise, so there is an element of sticker shock," said Niall Gallagher, investment director for European equities at GAM Investments.

Credit Suisse fell 2.8% after it froze 10.4 billion Swiss francs ($10.63 billion) of wealthy clients' assets in the first quarter under sanctions imposed in connection with Russia's invasion of Ukraine.

Airbus gained 6.3% after the world's biggest planemaker reported a higher-than-expected quarterly profit and firmed up record plans for a 50% hike in key narrowbody jet output.

Oil giant Shell rose 3.1%, lifting the oil and gas sector, after reporting a record first-quarter profit of $9.13 billion, boosted by higher oil and gas prices and a strong performance of its trading division.

About half of the STOXX 600 companies have reported quarterly results so far, and 71% of those have topped analysts' profit estimates, as per Refintiv IBES data. Typically, 52% beat estimates in a quarter.

Overall, first-quarter earnings for European companies are expected to grow 35.4%, up from 20.8% at the start of the earnings season.

The European Central Bank (ECB) is expected to raise interest rates later this year. Euro zone inflation hit a record high 7.5% in April, nearly four times the ECB's target, but the central bank has been slow to move amid concerns about a weakening economy.

(Reporting by Sruthi Shankar and Shreyashi Sanyal in Bengaluru Editing by Sriraj Kalluvila and Mark Potter)

By Sruthi Shankar and Shreyashi Sanyal