FRANKFURT: European stocks fell on Thursday as concerns over US fiscal health kept Treasury yields elevated, while data showing weak euro zone business activity added to the gloom. The pan-European STOXX 600 index closed 0.6% lower, logging its biggest single-day fall since early April, and retreated further from a two-month high touched earlier this week. Investors have been grappling with lack of progress on trade deals as well as US President Donald Trump’s sweeping tax cut plans, which have raised concerns about ballooning US debt and sent government bond yields surging. “There’s a bit of nervousness around how large the US deficit has been structurally for a given period of time. You’re going to have a very uncertain picture with regards to growth and a certain outlook for deteriorating public finances,” said Iain Barnes, chief investment officer at Netwealth. The benchmark 10-year US Treasury yield was hovering around three-month highs on worries that US government debt would swell by trillions of dollars, as the House of Representatives passed Trump’s tax-cut bill. Following the US, yields on German long-term bonds hit a two-month high while ones on euro zone bonds edged up modestly, pressuring stocks. Adding to the dour mood, HCOB’s preliminary composite eurozone Purchasing Managers’ Index dropped to 49.5 this month from 50.4 in April, and the bloc’s dominant services industry suffered a deeper downturn in demand in a clear sign of the impact of US tariffs on the eurozone economy. All sectors on the benchmark STOXX 600 were lower, with personal and household goods, and automobiles and parts the biggest losers. “Markets had been doing pretty well and are taking a little bit of a sense check on how far they’ve gone... It seems they’ve run out of good news for the time being,” Barnes said. Chemical stocks were flat, as losses were offset by an over 30% jump in Johnson Matthey after the British chemicals firm agreed to sell its unit to Honeywell International for 1.8 billion pounds ($2.4 billion), including debt.