European shares closed in positive territory Tuesday, lifted by data showing continued gradual improvement in the U.S. economy, but ongoing worries over Cyprus kept a damper on gains.
The FTSEurofirst 300 Index closed up 0.2 percent at 1,188.89, after a see-saw session which saw investors unsettled by concern that a rescue plan for Cyprus might turn out to be a template for other euro zone economies requiring bailouts.
Brightening the mood, data showed demand for long-lasting U.S. manufactured goods surged in February, suggesting factory activity continued to expand at a moderate pace, even though a gauge of planned business spending slipped.
"Markets are struggling to find direction due to the confusing position taken by authorities in relation to Cyprus although they're continuing to react to positive data from the United States," Henk Potts, market strategist at Barclays, said. "The corporate fundamentals remain very supportive indeed. Any signs of weakness should be used to gain exposure to an asset class that we think will continue to outperform in the medium to long term."
On Monday, a relief rally was curbed late in the trading day as Jeroen Dijsselbloem, head of the Eurogroup, told reporters that the rescue plan for Cyprus could serve as a model for dealing with future banking crises in the euro zone.
(Read More: Markets Jarred by Mixed Message From Europe)
The 10 billion euro ($13 billion) bailout for the Cypriot banking sector involves the winding down of Cyprus' second largest lender, the Popular Bank of Cyprus, and imposes a levy on uninsured deposits over 100,000 euros ($130,000) in Cypriot banks.
Later Dijsselbloem clarified that Cyprus was a "special case" due to the island's oversized banking sector.
Meanwhile, Michael Sarris, the Cypriot finance minister, told the BBC on Monday that large bank deposits above 100,000 euros could be taxed by as much as 40 percent.
(Read More: On the Lookout for Stray Comments From Europe)
Also in the country, the Bank of Cyprus has a new overseer in response to the recent bailout negotiations that has plagued the struggling island nation. A special administrator, Dinos Christofides, told Reuters news agency that he had been appointed on Monday night by the country's central bank.
In Asia, Shanghai shares slipped on Tuesday as investors sold off financials on liquidity concerns, while the rest of Asia's stock markets fell as concerns grew that Cyprus's bailout could be used as a template for future rescue plans.
Among economic data released on Tuesday, consumer confidence in France showed a slide from a figure of 84 in March against 86 in February. The consensus was for a figure of 85.
In stocks news, payment solutions group Ingenico released its 2016 business plan on Monday; shares climbed 3.86 percent.
Exane BNP raised its price target for Schroders and upgraded it to a "neutral" rating; shares in the asset management company rose by 3.83 percent. It agreed to buy rival Cazenove Capital on Monday.
Retail group Kingfisher posted full-year results that were in line with expectations. Profit fell 11 percent due to adverse weather and currency depreciation; shares rose by 1.73 percent.
A Merrill Lynch downgrade forced a sell-off in 's stock. Shares fell 5.63 percent and were one of the most traded stocks on the Euro Stoxx 600 on Tuesday morning.
London-listed miner Kazakhmys announced it was taking a bigger-than-expected impairment on its 20 percent stake of fellow mining company ENRC; shares fell 10.01 percent.
SBM Offshore posted the biggest gains across European indexes as it announced it had won a contract from Petrobas to build two oil platforms; shares climbed 3.92 percent.