European markets fell Thursday as investor confidence was low ahead of the Italian bond auction later in the day.

The German DAX 30 index fell 0.50 percent or 30.78 points to 6121.71. Shares of Deutsche Bank AG fell 2.43 percent.

The French CAC 40 index declined 0.83 percent or 25.07 points to 3004.97. Shares of STMicroelectronics NV fell 3.67 percent and shares of Peugeot SA declined 2.91 percent.

London's FTSE 100 index fell 0.87 percent or 47.44 points to 5436.37. Shares of Royal Dutch Shell PLC declined 1.05 percent and shares of BG Group PLC fell 1.51 percent.

Investors were watchful as the Italian government would sell 4.5 billion euros ($5.62 billion) of debt later Thursday. Market players were concerned about the contagion spreading to Italy with its rising borrowing costs.

Also dragging down the market sentiment was the report that Moody's Investors Service cut the credit rating of Spain to Baa3 from A3. Investors were worried that the economy of Spain was continuing to weaken in spite of the agreed aid to bailout its ailing banking system.