European equities closed slightly lower on Wednesday, tracking Wall Street, after a U.S. budget deal added to expectations the Fed will scale back stimulus soon.
The FTSEurofirst 300 provisionally closed down 0.46 percent to end the day at 1257.23 on Wednesday.
The Royal Bank of Scotland was among the biggest losers in Europe after its Finance Director Nathan Bostock resigned just 10 weeks in to the job. The stock closed down around 2.91 percent.
In other U.K. banking news, Lloyds Banking Group was fined £28 million ($46 million) by the U.K.'s Financial Conduct Authority (FCA) for "serious failings" in the way it paid incentives to its sales team. Shares ended the day around 1 percent lower.
(Read more: RBS's finance chief quits after 10 weeks in job)
US budget deal
On Tuesday in the U.S., Senate Democrats and Republicans reached a deal to reduce automatic spending cuts and provide $23 billion in deficit reduction spread over two years.
Analysts told CNBC they believed the deal would be passed by policymakers looking to avert another damaging government shutdown like the one seen in October.
The deal pushed defense stocks higher as some traders said the agreement removed a source of uncertainty over U.S. military spending. Shares in aerospace and defense companies BAE Systems and EADS were 2.5 percent and 7.4 percent higher respectively.
(Read more: What the US budget deal means for equity markets)
While the deal in the U.S. is welcome news, investors are remain uncertain about the timing of a reduction in the U.S. Federal Reserve's stimulus program. U.S. stocks turned negative on Wednesday, with the budget deal adding to expectations by some that the Fed will start tapering soon.
The Federal Open Market Committee, which sets policy, meets next Tuesday and Wednesday.
Meanwhile in Asia, equity markets declined Wednesday following a weak handover from Wall Street, with investors showing little reaction to news of the U.S. budget deal.
Italy back in the spotlight
Back in Europe, Italy's Prime Minister Enrico Letta faces a vote of confidence on Wednesday to confirm his party's new majority after Silvio Berlusconi's "Forza Italia" party pulled out of the ruling coalition.
Speaking ahead of the vote, Letta said the country's gross domestic product target should be growth of 1 percent in 2014 and 2 percent in 2015. He added the priorities were to cut the debt and deficit, as well as to reform electoral law so as to allow stable government. The FTSE MIB closed down around 1.44 percent.
Elsewhere, finance ministers have reached the basis of an agreement to wind down failing banks and share the costs, Eurogroup President Jeroen Dijsselbloem told CNBC following a 16-hour marathon negotiating session in Brussels.
The agreement is expected to begin with a Cyprus-style "bail-in" process in which major depositors in failing banks are tapped first in an effort to support the lender.
Stocks news
Shares in Spanish clothing retailer Inditex fell around 1.1 percent on Wednesday, despite releasing third-quarter earnings which showed sales rose 10 percent in the first six weeks of the fourth quarter.
The German publisher Axel Springer announced that it had around 150,000 paying subscribers for the online edition of its tabloid Bild. In mid-June the website launched its "freemium model" with some content remaining free whilst other stories have to be paid for. Shares in the German publisher's stock were higher by 1.12 percent.
Elsewhere, Sandell Asset Management called on British transport group FirstGroup to sell its U.S. businesses and bolster the balance sheet of its U.K. business. Sandell said a spin-off of its U.S. business and a sale of Greyhound would deliver greater than 50 percent upside to shareholders. Shares ended the day around 4.8 percent higher.
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