European equities closed lower on Tuesday as Swiss stocks weighed on bourses, and investor caution over the timing of the U.S. Federal Reserve's reduction of its stimulus program lingered.
The FTSEurofirst 300 Index provisionally closed down 0.56 percent, with Swiss stocks such as chemicals group Roche and food company Nestle knocking points off the SMI index, as the Swiss franc rose to a two-year high against the dollar.
Nervousness over the timing of a reduction in the U.S.'s stimulus program also kept investors on edge throughout Tuesday, following comments by St. Louis President James Bullard, a voting member of the central bank's policy committee, late Monday that the Fed could slightly reduce its buying program this month in response to the improved labor market.
Back in Europe, the Ecofin meeting of European Union (EU) finance ministers kicked off on Tuesday.
There were mixed messages from the meeting, as ministers attempted to hammer out a deal on how to wind down failing banks, in an effort to protect the region from another economic crisis. European Central Bank (ECB) board member Joerg Asmussen told CNBC that he did not expect a deal on Tuesday, while Swedish Finance Minister Anders Borg said that all the ingredients were present for an agreement on banking union.
(Read more: EU leaders inchcloser to banking union deal)
Meanwhile, revised figures released on Tuesday showed the Italian economy stagnated in the third quarter. The figures herald the end of two years of contraction for the country. Gross domestic product (GDP) was revised up from -0.1 percent to unchanged between July and September, although a spokesman from the bureau, ISTAT, said "from a technical point of view this data is not sufficient to say the recession is over." The Italian FTSE MIB provisionally closed down 0.27 percent.
In France, industrial output unexpectedly fell 0.3 percent in October after a 0.3 percent fall in September.
Greek Finance Minister Yannis Stournaras told CNBC he remained hopeful that Greece would receive its next 1 billion euro ($1.37 billion) installment of aid despite speculation that talks with Greece's creditors had faltered. Troika inspectors returned to Athens on Tuesday to assess the country's reform progress, amid ongoing squabbles over its reform agenda
Earlier on Tuesday, Asian equity markets declined in tepid trade as investors digested a raft of Chinese economic reports and a record close on Wall Street. Data released on Tuesday showed Chinese November retail sales beat estimates while industrial output matched market expectations. The data follows stronger-than-expected trade figures released at the weekend and confirmed hopes that the world's second-largest economy can sustain its positive trend into year-end.
Shares in Dutch oil terminal operator Royal Vopak fell over 2.1 percent after it announced that market circumstances meant it would be challenging for the company to exceed its record financial year of 2012.
BHP Billiton signaled its intention to limit annual spending to $15 billion in the face of weaker commodity prices, a significant decrease from the $21.7 billion it spent in the last financial year on various projects. Shares closed down around 1.9 percent.
TUI Travel, the world's biggest tour operator, said encouraging booking levels for next summer helped it to post a 13 percent rise in full-year profit and beat an already upgraded forecast. The British group posted underlying operating profit of £555 million ($909.45 million) for the year to the end of September. Despite this, shares closed down around 1.48 percent.
There were some positive closes, however, with shares in British equipment rental company Ashtead Group bouncing back to end the day around 3.7 percent higher after it posted a 41 percent rise in pre-tax profit during the second quarter. The firm said it now believed its full-year profit would reach the upper end of current expectations.
And British insurer Prudential's shares were up 1.66 percent after it set new growth objectives, driven by its Asian business.
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