The euro sank to a near-three week low against the dollar and stocks eased on Wednesday after data showed sluggish growth in euro zone services.
Bonds and global stocks also fell after minutes released overnight from the U.S. Federal Reserve's December meeting fuelled concerns that interest rates may have to rise faster than previously expected to contain inflation.
"(The FOMC minutes) showed the Fed in a more hawkish light than the market had generally perceived them to be," said Jason Simpson, a bond strategist at ABN AMRO in London.
"They said they were pretty much unconcerned by growth. Bottom line interest rates are too low."
A patchy report on the state of the euro zone's dominant service sector did little to improve sentiment in Europe, where stock indices pulled back from multi-year highs.
Weak consumer demand and high energy prices kept the December NTC Research Business Activity Index unchanged at a 15-month low of 52.6, slightly below expectations.
"The services economy seems to be suffering from the weakness in the manufacturing sector ... consumer demand remains weak in most of the key euro zone economies, and companies are still operating in a high cost environment," NTC's chief economist Chris Williamson said.
Other economists, though, said the data suggested sentiment was stabilising after a prolonged deterioration as oil prices cooled down and highlighted a pickup in new business for the first time in six months. ( )