European stocks were seen retreating on Wednesday, losing ground for the first time this year, as heavyweight resource-related shares feel the pinch of a sell-off in commodity prices.
European shares hit their highest closing level in nearly a week on Tuesday, with miners and oil firms contributing to the bulk of gains as commodity prices were boosted by strong manufacturing data from around the world.
Shares in BP hit a six-month high after The Daily Mail newspaper reported Royal Dutch Shell had considered a takeover bidduring the Gulf of Mexico oil spill, adding Shell could yet bid for BP.
Macroeconomic data on the agenda on Wednesday includes European producer price index numbers for November and industrial new orders data for October.
Investors will also be keeping a close eye on December data on growth in the services sector in the euro zone, the services purchasing managers' index (PMI), which is due on Wednesday morning.
The index, compiled from surveys of around 2,000 businesses ranging from banks to restaurants, rose to 55.4 in November, above the 50 mark separating growth from contraction. It will provide further detail on the health of the economy at a time of deep spending cuts.
Euro zone inflation was higher than expected in December, the European Union's statistics office said on Tuesday.
PMI data released on Tuesday showed manufacturing activity in Britain grew at its fastest pace in over 16 years in December.
The news came just after a rise in VAT from 17.5 percent to 20 percent took effect from midnight on Monday in the country, a measure some fear will stifle economic growth.