MILAN European shares suffered their worst day since September on Wednesday as political turmoil in the United States pushed investors into safe havens following a strong run that sent regional benchmarks to record highs.
Reports that U.S. President Donald Trump had asked then-FBI Director James Comey to end a probe into his former national security adviser have raised questions over whether obstruction of justice charges could be laid against the president.
That fuelled investor concern over his ability to deliver on aggressive stimulus plans and even raised the spectre that Trump himself could even face the threat of impeachment.
"Some may be running ahead of themselves with impeachment risks, though distractions that the latest headlines bring could mean further delays in policies," Citi told clients in a note.
The pan-European STOXX 600 fell 1.2 percent, its biggest one-day loss since end September, while euro zone blue chips .STOXX50E fell 1.6 percent, as volatility picked up.
Banks .SX7P and construction sector stocks .SXOP were the biggest sectoral fallers, both down around 2 percent.
Despite the heavy falls on Wednesday, European benchmarks remain near recent highs, having risen sharply as investors pile in to the region on the back of an economic recovery, robust company earnings and voters' rejection of populist parties in elections.
Yet signs the run has lost steam emerged on Wednesday when Morgan Stanley warned that richly valued European stocks closely geared to economic growth were set for a pull-back as earnings momentum slows and macro tailwinds fade.
Among single stock movers, French electricity producer EDF (EDF.PA) slumped 5.6 percent after Green activist Nicolas Hulot was appointed as the minister responsible for environment and energy in the new French government.
"There is a fear of a stricter ecological line given Hulot's history as an environmental campaigner," said Andrea Tueni, markets analyst with Saxo Bank.
On the earnings front, the Netherlands' largest domestic lender ABN Amro (ABNd.AS) fell 4.7 percent after its results. Traders cited a lower net interest margin and capital ratio, though the headline net income beat expectations at 615 million euros.
Ubisoft Entertainment (UBIP.PA), the third-biggest global entertainment company, fell 3.6 percent after it cut its mid-term sales forecast, reporting results near the bottom end of its target range after the close on Tuesday.
European earnings continued to paint a bright picture for the region's equities, with earnings growth for the quarter seen at 19 percent, according to Thomson Reuters data.
Thyssenkrupp (TKAG.DE) was the top STOXX gainer, up 3 percent after Tata Steel agreed the terms of a deal to cut benefits for its British pension scheme, removing a major obstacle to a potential tie-up of its steel assets with the German steel maker.
(Editing by Richard Lough)