Expectations of tighter monetary policies on both sides of the Atlantic weighed on global stock markets Wednesday amid talk that the ECB plans to cut back its vast stimulus drive.
Mounting evidence that the US Federal Reserve is gearing up for an early rise in key interest rates also dampened sentiment, but Wall Street stocks held up, lifted by rising oil prices.
"European equity markets are on the back foot as concerns grow that central banks are going to pare back accommodative policy," said Rebecca O'Keeffe, head of investment at stockbroker Interactive Investor.
Eurozone bond prices also fell, reflecting expectations of fewer ECB bond purchases, with the yield on the German 10-year benchmark bond rising by around five basis points.
The European Central Bank rebutted a report of an "informal consensus" among ECB policymakers that its quantitative easing (QE) bond-buying stimulus programme should be gradually scaled back in steps of 10 billion euros ($11.2 billion) -- a move known as "tapering".
"Governing Council has not discussed these topics, as (ECB president Mario) Draghi said at last press conference and during testimony at European parliament," tweeted ECB media relations chief Michael Steen.
- 'Taper tantrum' -
But European markets still threw a "taper tantrum", noted analyst Craig Erlam at Oanda, cautioning however that even if the ECB was considering scaling back QE, such a move may not come "anytime soon".
Wall Street stocks were trading on the upside as investors looked past a small slowdown in the pace of hiring in September to rising oil prices which in turn boosted petroleum-linked shares.
Twitter shares rose more than four percent on a Wall Street Journal report saying that suitors are expected to lodge bids for the company this week.
The dollar pushed on with this week's rally against most other global currencies, scoring another 31-year high against the beleaguered pound, which remains dogged by fears of an uncompromising, or 'hard', Brexit.
The stronger dollar also sent gold tumbling on Wednesday to $1,266.69 per ounce, its lowest level since late June.
The rising greenback makes dollar-priced commodities more expensive for buyers using weaker currencies. In turn, that tends to weigh on demand and dent prices.
Earlier in Asia, Tokyo stocks rose as the weaker yen boosted exporters.
Hong Kong was buoyed by recent upbeat China data and the impending opening of a link-up with the Shenzhen stock exchange that could see fresh funds flood in.
However, most other Asian markets struggled.
Oil prices meanwhile continued rebounding and received a extra boost from Wednesday's US data showing a surprise decline in stockpiles.
- Key figures around 1545 GMT -
London - FTSE 100: DOWN 0.6 percent at 7,033.25 points (close)
Frankfurt - DAX 30: DOWN 0.3 percent at 10,585.78 (close)
Paris - CAC 40: DOWN 0.3 percent at 4,489.95 (close)
EURO STOXX 50: DOWN 0.1 percent at 3,026.41
New York - DOW: UP 0.7 percent to 18,285.86
New York - S&P: UP 0.5 percent to 2,160.50
New York - Nasdaq: UP 0.6 percent to 5,321.90
Tokyo - Nikkei 225: UP 0.5 percent at 16,819.24 (close)
Hong Kong - Hang Seng: UP 0.4 percent at 23,788.31 (close)
Shanghai - Composite: Closed for holiday
Pound/dollar: UP at $1.2758 from $1.2724 Tuesday
Euro/pound: DOWN at 87.84 pence from 88.05 pence
Euro/dollar: UP at $1.1210 from $1.1203
Dollar/yen: UP at 103.45 yen from 102.88 yen
Oil - Brent North Sea (December delivery): UP $1.11 at $51.98 per barrel
Oil - West Texas Intermediate (November): UP $1.19 at $49.88