European stocks closed lower on Thursday as mounting political uncertainty in the U.S. exacerbated concerns among investors as to whether President Donald Trump would be able to deliver on key pro-growth policies.

The pan-European Stoxx 600 ended the day, down 0.5 percent with most sectors and major bourses in negative territory.

Financial services stocks contracted more than 1 percent, dragged lower by Intrum Justitia (Stockholmsborsen:IJ-SE)'s divestment proposals. The Swedish debt collection firm submitted a series of spin-offs on Thursday in a bid to alleviate European Commission concerns over its planned merger with Lindorff, its Norwegian rival. Shares in the Stockholm-based firm slumped to the bottom of the benchmark, down over 11 percent.

Auto stocks were also among the worst performers on Thursday. Fiat Chrysler (Milan Stock Exchange: FCA-IT), led the losses in the sector after the European Commission launched legal action against Italy for failing to respond to accusations of emission test cheating by the embattled Italian carmaker. Its shares dipped more than 3 percent.

British luxury group, Burberry (London Stock Exchange: BRBY-GB), posted a 21 percent drop in full-year pre-tax profit on Thursday, marking the challenge for incoming CEO Marco Gobbetti. The current chief executive, Christopher Bailey, said the past 12 months had been a year of "transition" and suggested he was optimistic ahead of Gobbetti's arrival in July. Burberry's shares rose more than 4 percent.

On Wall Street, markets inched higher rebounding from their biggest sell-off of 2017.

Political uncertainty in Washington hits risk sentiment

Political turmoil in Washington worsened on Tuesday when reports surfaced that Trump had pressed then-FBI Director James Comey to drop a probe into former National Security Advisor Michael Flynn. The White House has denied the accusation.

The latest development , which sees former FBI Director Robert Mueller recruited as a special counsel to oversee a federal investigation into alleged Russian interference during the presidential election, appeared to accentuate jitters in the market.

Sterling moved beyond $1.30 for the first time in nearly eight months on Thursday after U.K. retail sales beat forecasts. Volumes jumped 2.3 percent in April, cooling worries over the pace of spending by consumers under pressure from rising inflation.

Prime Minister Theresa May said Thursday morning that the next five years will be among the most challenging as Britain negotiates an exit from the European Union. Her party has received 4.1 million pounds in donations in the first week of election campaigning, Reuters reported.

France hold a cabinet meeting of its newly appointed government. Support for President Emmanuel Macron's centrist party is seen growing ahead of legislative elections in June, according to a Harris Interactive poll published Thursday, increasing the likelihood the former economy minister could secure parliamentary support for his reform plans.

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