Europe's major indexes closed lower Tuesday as investors remained cautious in the run up to Wednesday's Federal Reserve decision and in the wake of a generally disappointing batch of major earnings reports.
Swiss bank UBS, Chemical company BASF, auto-parts maker Continental and dental-implant maker Nobel Biocare were among those issuing results and ending in the red on the back of the numbers.
A negative U.S. open added to the lackluster sentiment among amoung European investors.
Many in the stock markets expect the Federal Open Market Committee to cut interest rates for a second consecutive time when the Fed issues its decision Wednesday.
But an article in the Wall Street Journal cast doubt on the matter, with the Journal's Greg Ip, who is known to sometimes reflect the views of senior Fed decision-makers, saying the central bank was pondering a quarter-point cut versus no cut at all.
Still, analysts say the central bank would rather not risk disappointing Wall Street and is likely to go ahead with a rate reduction on Wednesday.
"If they (the Fed) over-cut, the problem is minuscule, if they under-cut, the problems could be profound," Roger Nightingale, strategist at Pointon York, told CNBC's "European Closing Bell."
UBS closed lower by 1.3 percent on the SMI index after it reported a third-quarter net loss due to problems trading in the U.S. mortgage securities and warned investors of another loss in the fourth quarter for its investment banking arm.
Continental dragged other tire manufacturers like Michelin to a lower close after it missed analysts' expectations with a 7 percent rise in profit, as opposed to the 17 percent hoped for.
And mining stocks were the worst performers on the FTSE-100 index, following retreating commodities prices.
Looking to the economy, French Economy Minister Christine Lagarde suggested that the jobless figures due out later on Tuesday will "offer good news on the French labor market," Reuters reported.
Assualt on D'Assault Shares
Shares of French Software maker D'Assault Systemes plunged 6.4 percent after the company reported a 3 percent drop in quarterly earnings per share due to a higher tax rate and cuts its full-year revenue forecast to compensate for a weaker dollar.
Appearing on "Squawk Box Europe," CEO Bernard Charles said the company has a "natural hedge" for a weaker dollar in its business model and that more dollar weakness won't affect the bottom line in 2008.
Software sales will also see double-digit growth next year as the company continues to transition to a model where more revenue comes from subscriptions to online software, Charles said.