Europe close: Stocks end lower ahead of Fed amid concerns around banks

European shares got off to a poor start in May as investors waited anxiously for the US central bank's policy decision the next day and continued concern around the banking sector.

The latter came despite news at the weekend that JP Morgan had agreed to buy troubled US regional lender First Republic Bank.

"Last week saw risk appetite revive on better earnings from tech giants, but a host of worries about interest rates, further bank crises, the US debt ceiling and of course pre-Fed nerves have conspired to prompt a reversal in equity markets," said IG chief market analyst Chris Beauchamp.

"European and US indices are down sharply, as investors' nerves get the better of them."

The pan-regional Stoxx 600 index was down 1.24% at 461.08 with all major bourses lower.

Germany’s DAX fell 1.23% to 15,726.94 as Europe’s biggest economy reporting a surprise 2.4% fall in retail sales in March.

Spain's Ibex 35 retreated 1.72% to 9,082.0.

Front-dated Brent crude oil futures gave back 3.7% to $75.62 a barrel on the ICE while the Stoxx 600 gauge of lenders' shares dropped by 1.47%.

The US Federal Reserve was widely expected to announce a further 25 basis point interest rate hike in official short-term interest rates the next day.

In economic news, eurozone inflation edged higher in April as energy prices rose, but core inflation unexpectedly eased, according to data released on by Eurostat.

Headline consumer price inflation rose to 7% year-over-year from 6.9% in March, in line with consensus estimates.

Meanwhile, core inflation - which excludes food, alcohol, tobacco and energy - ticked down to 5.6% in April from 5.7% the month before. Analysts had been expecting it to be unchanged.

Overnight, the Reserve Bank of Australia unexpectedly hiked rates.

Corporate earnings continued aplenty, with HSBC shares up as Europe's largest bank reinstated its dividend after beating first-quarter profit expectations and also announced a new cycle of share buybacks for up to $2bn.

Shares in education publisher Pearson slid after US firm Chegg, which provides online guidance for students preparing tests, warned over the impact of AI chatbots on its homework-help services.

BP shares plummeted after the UK oil giant posted a $5bn profit in the first quarter but cut back its share buyback programme.

Logitech shares gained after its results were well received, but AMS-Osram stock fell as quarterly earnings disappointed.

Electrolux shares topped the risers after reports of an approach from China's Midea Group for a potential acquisition of the Swedish brand.