"It is good news, but only at the margins," he added.
Banks remained a prominent negative weight on the FTSEurofirst 300, with investors spooked by a shock writedown from Merrill Lynch overnight.
The DJStoxx European banks index was down 0.6 percent, with UBS losing 3.6 percent, Barclays dropping 4.1 percent and BNP Paribas down 1.8 percent.
The banking index lost as much as 3.6 percent earlier in the session.
A bearish note from Merrill Lynch dampened an already subdued mood in the sector.
"Many European banks are holding structured credit assets similar to those of Merrill Lynch. The write-downs at Merrill Lynch are therefore potentially useful reference points for European banks' marks," the broker said.
In addition, it estimated that European banks were only 77 percent of their way through toxic writedowns, down from an earlier estimate of 85 percent.
A sharp decline in the price of oil to the lowest level since May 6 amid signs of weakening demand helped lift the mood in other sectors, with airlines gaining ground, also lifted by news that British Airways and Spain's Iberiawere in talks about an all-share merger.
British Airways rallied 6 percent. Heavyweight oil stocks, however, fell: BP, Shell and Total lost between 0.9-2.5 percent.
"What we are seeing is a self-correcting mechanism: when the oil price was very strong, it undermined confidence in global growth and the oil price is itself a function of global demand," said McAlinden.
The stream of profit warnings also continued to haunt investors, with Akzo Nobel cutting its target for 2008 profit, pointing to currency effects, rising material prices and a slowing economy. The stock slumped 10.9 percent.
German flavors and fragrances maker Symrise lost 6.5 percent after it lowered its forecasts for profit growth.
"It does seem like we have a couple of warnings every day and that had to be expected because the outlook for economic growth," said McAlinden.
"The issue is to which extent markets have already discounted these conditions and whether they are cyclically transient rather than structurally more permanent," he added.
There were some bright spots among companies reporting on Tuesday.
SAP rallied 9.8 percent after releasing a solid set of second-quarter earnings results and providing an upbeat 2008 outlook.
The sector as a whole gained 2.1 percent according to the DJStoxx European technology index.
Dutch chemicals group DSM also impressed with its quarterly earnings results. The company also raised its guidance for the full-year and shares soared 8 percent.
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