European stocks fell on Thursday, as concerns over U.S. fiscal health kept Treasury yields elevated, while investors awaited business activity readings to gauge the impact of U.S. tariffs on the euro zone economy.
The pan-European STOXX 600 index was down 0.6%, as of 0718 GMT, retreating further from a two-month high touched earlier this week.
Wall Street closed sharply lower on Wednesday, as the benchmark 10-year U.S. Treasury yield climbed to three-months highs on worries that U.S. government debt would swell by trillions of dollars if Congress passes President Donald Trump's proposed tax-cut bill.
The House of Representatives voted on Thursday roughly along party lines to begin a debate that would lead to a vote on passage later in the morning.
Meanwhile, data showed France's private sector shrank for a ninth consecutive month in May, weighed down by continued weakness in the services sector.
PMI data for both the euro zone and the UK are due later in the day.
Among single stocks, Johnson Matthey soared 33%, on course for its biggest percentage gain on record, after the British chemicals firm agreed to sell its unit to Honeywell International for 1.8 billion pounds ($2.4 billion), including debt.
Freenet AG slid 11%, becoming the top decliner on STOXX 600, after the German telecoms firm reported its first-quarter numbers.
(Reporting by Sruthi Shankar in Bengaluru; Editing by Sherry Jacob-Phillips)
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