European stocks remain lower on China, Fed worries; Dax down 2.30%

European stocks remained sharply lower on Thursday, after positive euro zone data, as a weak Chinese manufacturing report and expectations for a near-term end to the Federal Reserve's bond buying program weighed. 

During European morning trade, the EURO STOXX 50 plunged 2.06%, France’s CAC 40 tumbled 2.08%, while Germany’s DAX 30 plummeted 2.30%. 

Data showed that the euro zone manufacturing purchasing managers' index rose to 47.8 from a final reading of 46.7 in April, better than expectations for a reading of 47.0, still below the 50 level that separates growth from contraction.

The euro zone services PMI rose to 47.5 from 47.0 in April, above expectations for 47.2. 

Sentiment was hit earlier after the preliminary reading of China’s HSBC manufacturing PMI fell to 49.6 in May, below the 50 level that separates contraction from growth down from a final reading of 50.4 in April. 

Stocks were also under pressure after Fed Chairman Ben Bernanke said on Wednesday that a decision to scale back the central bank's asset purchase program could be taken in the "next few meetings" depending on economic data. 

Financial stocks extended earlier losses, as French lenders BNP Paribas and Societe Generale plummeted 2.91% and 4.11%, while Germany's Deutsche Bank plunged 4.52%. 

Peripheral lenders also pushed lower, with Spanish banks BBVA and Banco Santander declining 1.94% and 2.19% respectively, while Italy's Unicredit and Intesa Sanpaolo slumped 3.23% and 3.49%. 

In London, FTSE 100 retreated 1.73%, as U.K. lenders tracked their European counterparts sharply lower, while official data confirmed that the U.K. economy expanded by 0.3% in the first quarter. 

Shares in Lloyds Banking tumbled 2.76% and HSBC Holdings plunged 3.12%, while the Royal Bank of Scotland and Barclays dove 3.96% and 4.11% respectively. 

Bloomberg reported earlier that Lloyds Banking plans to auction about USD8.7 billion of U.S. mortgage securities without government backing that were issued before the credit crisis. 

Mining stocks also remained on the downside, as BHP Billiton and Rio Tinto plummeted 2.84% and 3.50%, while Anglo American sank 4.35%. 

In the U.S., equity markets pointed to a sharply lower open. The Dow Jones Industrial Average futures pointed to a 0.94% drop, S&P 500 futures signaled a 1.15% decline, while the Nasdaq 100 futures indicated a 1.09% slump. 

Also Thursday, Germany’s manufacturing PMI rose to a two month high 49.0 from 48.1 in April. 

Later in the day, the U.S. was to release the weekly government report on initial jobless claims and official data on new home sales.