European equities closed lower on Tuesday as investors looked ahead to the U.S. Federal Reserve's last policy meeting of the year.
Fed woes persist
The provisionally closed lower, down 0.7 percent at 1,249.61 points. It had been up 15 percent on the year at the end of November, but since then has dropped about 4.2 percent. The index gained 1.3 percent on Monday after stocks rallies amid weak trading volumes. It is now on course for its first December drop since 2008.
The macroeconomic picture of Fed "tapering" continues to plague investor sentiment with the extra liquidity provided by the central bank seen as a key driver behind this year's rally. The U.S. central bank's monetary policy committee will begin a two-day meeting on Tuesday amid talk that stronger economic data in recent weeks, including employment and consumer confidence, are in favor of a reduction of its monthly bond purchases.
U.S. stocks opened near unchanged on Tuesday after a report showed the cost of living held unchanged last month from October, with investors considering the impact of the consumer-price index data on monetary-policy decisions by the Federal Reserve.
(Read More: Is a 'panic taper' the real risk to markets?)
German data beats
Investor sentiment showed little signs of a recovery even after stellar data out of Germany. The closely-watched German ZEW Indicator of Economic Sentiment showed an uptick to 62.0 for December -- its highest level since April 2006 and way above estimates of 55.0.
A final reading for euro zone inflation confirmed consumer prices were higher by 0.9 percent (year-on-year) in November. In the U.K., inflation data for December came in below market expectations, showing an increase of 2.1 percent on the year, compared with a forecast of 2.2 percent.
CGG shares plummet
British supermarket groups experienced a difficult day oftrading as they were hit by fresh signs of a loss of market share.
Supermarket retailers were among the worst-performing FTSE 100 stocks (the index fell 0..5 percent at close) after a survey from market researcher Kantar World panel showed that more than half of Britain's households shopped at German discount grocers Aldi or Lidl over the past 12 weeks, a blow to the UK's "big four" supermarkets - Tesco, Sainsbury, Wal-Mart's Asda and WM Morrison. Tesco closed down 1.9 percent while Sainsbury sunk 4.32 percent.
French oil surveying firm CGG was the biggest faller on the DJ Stoxx Europe 600 index after it revised down its full-year earnings forecasts on Tuesday. Shares closed down 16.85 percent.
Shares in U.K. drug maker GlaxoSmithKline also closed lower -- down 1.35 percent -- after it said it would no longer pay doctors to promote its products.
(Read More: )
Meanwhile, shares of Zurich Insurance closed higher by 1.85 percent after it named George Quinn as its new chief financial officer.
Follow us on Twitter: @CNBCWorld