Stock indices closed lower after Fed Chair Janet Yellen's testimony. She added that if the labour market continues to improve more quickly, the Fed will hike its interest rate sooner than expected, but weaker conditions will mean a longer period of low interest rate.

In the earlier trading session, stocks dropped due to the weaker-than-expected German ZEW economic sentiment index. The ZEW economic sentiment index for Germany declined to 27.1 in July from 29.8 in June, missing expectations for an increase to 33.4. That was the seventh straight decline in seven months.

The ZEW economic sentiment index for the Eurozone increased to 61.8 in July from 58.4 in June, missing expectations for a rise to 62.3.

Concerns over Portugal's bank Banco Espirito Santo SA also weighed on markets.

The Bank of England Governor Mark Carney said today that the timing of the first interest rate hike by the BoE would be "driven by the data".

Software AG shares slid 18.80% after lowering its full-year operating profit.

Banco Espirito Santo SA shares dropped 14.19% as its parent company faces a debt payment due today.

Indexes on the close:

Name Price Change Change %

FTSE 100 6,710.45 -35.69 -0.53%

DAX 9,719.41 -63.60 -0.65%

CAC 40 4,305.31 -44.73 -1.03%