Europe closes higher on talk of Greek bailout deal

European equities closed higher on Tuesday following rumors of a compromise deal on Greek debt.

The pan-European FTSEurofirst 300 closed provisionally 0.5 percent higher at 1,487.76 points, with all sectors in positive territory bar basic resources and oil and gas.

The benchmark German DAX index closed unofficially 0.8 percent higher, while the French CAC 40 ended up 0.9 percent.

The U.K.'s FTSE 100 closed provisionally down 0.2 percent, with falling oil prices weighing on the basic resources and energy-dominated index.

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Investors are waiting to see if a deal between Greece and the euro zone will be struck when the euro group of finance ministers meets in Brussels on Wednesday. Greece's Finance Minister Yanis Varoufakis is expected to detail new reform proposals at the meeting.

Stocks were boosted by speculation that the European Commission could be ready to table a compromise on Greece's bailout program and propose a six-month extension to the country's bailout, which is due to end on February 28.

Read MoreGreece needs to play by the rules: France

The Athens benchmark stock index closed around 8 percent higher on Tuesday.

Stock news

Shares of Italian bank Intesa Sanpaolo closed around 4 percent higher after the bank reported that it swung back to profit in the fourth quarter, although the figure was below analysts' forecasts.

Meanwhile, shares of Italian investment bank Mediobanca closed around 4.5 percent higher after the bank reported second quarter results that showed rising revenue, despite a drop in net profit.

UBS, the biggest Swiss bank, doubled its full-year dividend to mark its biggest payout since the credit crisis on Tuesday, but warned the Swiss franc's strength could hit future profits. Shares of the bank closed down around 2.6 percent following the results.

Meanwhile, shares of tire maker Michelin closed down around 2.6 percent after the company's 2014 full year profits fell, missing forecasts.

China fears

Outside of Europe, data out of China added to concerns of slowdown. China's consumer price index (CPI) rose 0.8 percent in January from a year ago period, below a Reuters consensus for a 1 percent gain. The producer price index fell an annual 4.3 percent, worse than the 3.8 percent decline expected.

In the commodities markets, benchmark Brent crude oil prices fell below $57 a barrel on Tuesday, after the International Energy Agency (IEA) said the U.S. would remain the world's top source of oil supply growth until 2020—defying expectations of a more dramatic slowdown in shale output growth.

Read MoreOil market rebalancing 'could take years': IEA