Nearing the half-way stage, London's FTSE 100 index of leading blue-chip shares slid 1.06 percent to 6,326.40 points.

Frankfurt's DAX 30 shed 1.46 percent to 7,494.81 points and in Paris the CAC 40 dropped 1.36 percent to 5,671.02.

The DJ Euro Stoxx 50 index of top eurozone shares decreased by 1.43 percent to 4,301.72 points.

European markets had rallied on Tuesday and Wednesday.

In Paris, the share price of BNP Paribas dived 3.17 percent to 82.74 euros after a unit of the French bank said Thursday it had suspended three of its funds amid concerns sparked by the crisis in the US subprime, or high-risk, mortgage market.

BNP Paribas Investment Partners said it had suspended the funds Parvest Dynamic ABS, BNP Paribas ABS Euribor and BNP Paribas ABS Eonia, adding that it would accept no redemptions or subscriptions until further notice.

There are growing jitters about the potential fallout from problems in US subprime lending sector, where mortgages are provided to people with poor credit histories.

That, in turn, could affect private equity groups because their takeover bids are often financed by large amounts of bank debt.

On Wednesday, Bank of England governor Mervyn King said the credit problems being experienced in the United States did not amount to an "international crisis."

Dealers in Hong Kong said share prices there closed lower Thursday as caution re-emerged in late trade after the announcement by BNP.

Stocks had advanced significantly, but trading changed course when the news about BNP hit the market, wiping out the day's gains.

BNP's move follows a similar decision last Friday by the German mutual fund Union Investment which froze one of its funds that has exposure to the US subprime market.

The market will be eager to see how Wall Street reacts to the BNP news when it reopens later Wednesday.

US stock markets finished sharply higher on Wednesday, with technology shares getting a lift a day after computer network giant Cisco posted healthy earnings, and after the Fed kept interest rates on hold.

Japanese share prices also closed higher on Thursday, as trading concluded before the announcement by BNP Paribas.

On Wall Street, the leading Dow Jones Industrial Average closed up a hefty 1.14 percent at 13,657.86 points on Wednesday.

The tech-rich Nasdaq jumped 2.01 percent to finish at 2,612.98 points and the Standard Poor's 500 index gained 1.41 percent to 1,497.49.

In Asia, the Tokyo Stock Exchange's Nikkei-225 index of leading shares rose 0.83-percent to close at 17,170.60 points on Thursday.

Hong Kong's key Hang Seng Index closed down 0.43-percent at 22,439.36 points. But Chinese share prices rose 1.95 percent, extending their record-breaking performance to a fifth consecutive day.

Chinese trading also ended before BNP said it had suspended funds.