The pan-European Stoxx 600 was down 0.6 percent, with major indexes in the red, except for FTSE 100 that held on to a slight positive.
Raab, in a letter to the U.K leader, said he could not reconcile with the terms of her proposed Brexit deal, after the promises the ruling Conservative Party made to the country in an election manifesto last year.
Sterling plunged more than 1 percent on the news to trade at $1.28 levels. Meanwhile, British bond yields fell across the board as the latest Brexit headlines boosted demand for safe-haven assets.
On Wednesday, British Prime Minister Theresa May said she had obtained enough support from senior members of her Cabinet for a draft Brexit deal to move forward. But market watchers say that there are doubts over whether the draft withdrawal agreement will get parliamentary approval.
Aside from Brexit, stocks in Asia saw market sentiment improve on reports that China has delivered a written response to U.S. trade demands. U.S. government sources told Reuters on Wednesday that China had sent a response to U.S. demands on the ongoing trade negotiation, giving hopes to investors that the two sides might bring an end to the spat.
Concerns over an oversupply in oil markets continues to dominate investor sentiment. On Thursday, oil prices slipped amid fears of rising supply and slow consumption. Front-month Brent crude oil futures were trading at $65.88 per barrel, down 24 cents, or 0.4 percent, from their last close.
U.S. West Texas Intermediate (WTI) crude futures were at $55.96 a barrel, down 29 cents, or 0.5 percent.