In addition, euro-zone sovereign debt fears are back in focus, after Standard & Poor's downgraded Greece's long-term sovereign credit rating to 'CC' from 'CCC,' and euro-zone confidence surveys Thursday are not expected to be good.
On Wednesday, comments from German Finance Minister Wolfgang Schaeuble on the constraints on the European Financial Stability Facility dampened sentiment towards the euro, alongside warnings by Fitch ratings agency that Italy may need more austerity measures to bring its deficit in line with targets.
"Such comments highlight there is still long way to go before markets are convinced that the situation in Europe is fully on the mend," warned Mitul Kotecha, head of global foreign exchange research at Credit Agricole Corporate & Investment Bank.
Cameron Peacock, market analyst at IG Markets, called London's FTSE 100 down 49 points, or 0.8% lower, at 5808, Frankfurt's DAX 0.8% lower, or 56 points, at 7197 and Paris's CAC-40 down 34, or 0.9%, at 3700.
A downbeat session on Wall Street saw the DJIA index fall 1.6% and the S&P 500 fall 2.0%. Investors fear a default if policy makers do not end the country's debt-ceiling standoff and find a solution before Aug. 2.
The DJIA forward futures contract was up 0.2% at 12,267.0 at 0555 GMT.
Earlier, Asian stock markets were lower s the U.S. debt ceiling impasse dampened market sentiment, while a stronger yen continued to put pressure on Japanese exporters, though utilities staged a strong rebound after an early sell-off in Tokyo.
Japan's Nikkei Stock Average fell 1.5%, Australia's S&P/ASX 200 slid 1.5%, South Korea's Kospi Composite lost 0.9%, China's Shanghai Composite Index fell 1.0% and Hong Kong's Hang Seng Index was down 1.1%.
In foreign exchange markets the euro slipped against the dollar and the yen.
At 0550 GMT, the single currency was at $1.4360 against the dollar, from $1.4363 late Wednesday in New York. The dollar was at Y77.76, from Y77.98.
Although traditional safe havens have been back in favor of late, gold was pulling back from recent highs. Spot gold was down $0.20 at $1,614.6 a troy ounce well off Wednesday's record high of $1,628.64/oz. The September bund slipped 0.02 to 129.35. September Nymex crude futures were down $0.18 at $97.22.
On the economic agenda, the German unemployment rate is due at 0755 GMT, euro-zone confidence surveys are at 0900 GMT and U.K. CBI distributive trade data are at 1000 GMT. Meanwhile, the corporate agenda is busy, with the likes of Alcatel-Lucent, Danone, France Telecom and Royal Dutch Shell all reporting.
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