In the U.S., stocks rose on Wednesday after a report showing expansion in the service sector countered worse-than-anticipated reports on the economy's performance in the first quarter and an unexpected drop in orders for durable goods in May.
Concerns over Iraq were weighing on global markets. There is little indication the country's leadership is responding to pressure by foreign leaders to reform government in an attempt to stem the Sunni insurgency. U.S. Secretary of State John Kerry was in Iraq's Kurdistan region on Tuesday, as Iraqi government forces fought militants for control of the country's biggest oil refinery.
In a letter to European Union leaders late on Tuesday, European Council President Herman Van Rompuy, said topics for discussion at this week's summit on Thursday and Friday will include the candidacy for the presidency of the European Commission. Former Luxembourg Prime Minister Jean-Claude Juncker is a strong favorite, despite opposition from the U.K.'s David Cameron.
Other discussion points will be the turmoil in Ukraine as well as energy and climate change policies.
The U.K.'s Stagecoach posted earnings in line with expectations, with adjusted earnings per share for the year rising to 26.0 pence from 24.6 pence. Analysts at Panmure Gordon retained their "buy" recommendation on the stock and said the results reflected good progress in North America, modest improvement in U.K. bus and a deterioration in U.K. rail. Its shares closed down around 0.7 percent.
Technology company Northgate also posted full-year results in line with its forecasts, reporting a gain in pre-tax profit. The stock closed up around 1.6 percent.
Miners like Rio Tinto and BHP Billiton, which are listed in both the U.K. and Australia, closed slightly lower on Tuesday, after iron ore prices fell for the first time in five days. This came after Australia revised down its 2015 price forecast to $94.60 a ton from $100.80.
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Shares of France's GDF Suez closed down around 0.7 percent after the French state sold a 3.1 percent stake in the company to help fund its part-nationalization of Alstom. Shares of Alstom closed up around 1 percent higher.
Meanwhile, Portuguese bank Millennium BCP announced a 2.25 billion-euro ($3 billion) capital hike, which it hopes to use to repay state loans.
Japanese shares retreated on Wednesday, as investors shrugged off Prime Minister Shinzo Abe's latest reform plan, announced after the market close on Tuesday.
"We were provided with some hints about future growth and the reform path, but we're still somewhat light regarding any sort of implementation timeline," said Matthew Hegarty, equities analyst at Perennial International.
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—By CNBC's Katy Barnato