European equities edged higher on Tuesday, building on the previous session's strong gains and bolstered by expectations that euro zone finance ministers will approve the next tranche of bailout cash for Greece.
Top officials signaled they were hopeful the Tuesday evening meeting would result in a solution, avoiding a fresh escalation of the euro zone crisis and the threat of bankruptcy for Athens. However, issues remain and a deal on debt reduction may be subject to more negotiations.
The deal, worth 44 billion euros ($56.3 billion), has been delayed by differences between the EU and the International Monetary Fund over Greece's debt reduction targets and restructuring.
"It's just short covering ahead of this evening's meeting of EU finance ministers," said Markus Huber, trader at ETX.
"They have basically promised that they would find a solution ... It's a typical pattern — ahead of the meetings you always go up, and then they usually disappoint and we come back the next day."
The FTSEurofirst 300 provisionally closed up 0.3 percent at 1,094.35 points, with its rebound from a session low of 1,087.08 points also supported by stronger than expected U.S. housing starts data and gains on Wall Street.
Earlier in the session, European shares traded lower, led by France's CAC 40, after credit ratings agency Moody's Investor Service stripped France of its triple-A rating. Moody's cited fiscal concerns, a weak growth outlook and a loss of competitiveness as reasons for the downgrade.
Moody's actions heightened the risk of cuts for other top-rated economies such as the U.S. and Germany. France is also on a "negative outlook", signaling that it could be downgraded further if economic conditions do not improve.
E.U. finance ministers meet in Brussels today to discuss a deal on emergency aid for Greece worth 44 billion euros ($56.3 billion) on Tuesday. Athens could receive the money on December 5, but only if it fulfills all remaining reforms and once there is agreement on how to reduce the country's debt according to multiple reports.
In stocks news, the banking sector closed lower. Shares in Swiss bank Credit Suisse closed down after the company said on Tuesday that it will dismantle its asset management unit. The bank was also in the news on Monday after Reuters reported that the New York attorney-general is preparing to file a civil lawsuit against it for misleading investors who lost billions of dollars on mortgage-backed securities.
Shares in Easyjet closed more than 6 percent higher after the low-cost carrier reported a rise in full-year profit on Tuesday, and doubled its dividend.
Also on Tuesday, mining giant Glencore was reported to be close to a takeover of Xstrata after nine months of protracted negotiations. The $31 billion deal is one of the largest tie-ups in the sector to date.