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Europe ends sharply lower after Turkey downs Russian jet

European markets finished sharply lower on Tuesday after Turkish fighter jets shot down a Russian warplane near the Syrian border.

The pan-European STOXX 600 finished down over 1.3 percent with all major indices in negative territory. France's CAC and the German DAX both ended over 1.5 percent lower.

Oil prices rally 3%

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The pan-European STOXX 600 was down over 1.8 percent with all major indices in negative territory. France's CAC was down more than 2 percent.

U.S. stocks followed Europe and opened lower. Revised third-quarter U.S. gross domestic product came in as expected, up 2.1 percent from the original reading of 1.5 percent.

Oil prices got a boost Monday, rising as much as 3 percent, after tensions in the Middle East escalated following the downing of a Russian fighter jet near the Syrian-Turkish border, and a weaker dollar provided an incentive for investors to buy more oil.

Saudi Arabia pledged to work toward oil price stability on Monday amid increased uncertainty around security in the Middle East, also lending support to the price.

Brent futures for January were up around $1.32 at $46.17 a barrel around market close in London, up 3 percent on Monday's close. U.S. West Texas Intermediate (WTI) crude was up $1.23, or 2.8 percent, at $42.96.

Travel stocks hit after Russian jet shot down by Turkey

A Turkish official said that a Turkish fighter jet shot down a Russian warplane near the Syrian border after it violated Turkey's airspace. Russia's defense ministry denied any wrongdoing.

The news comes after the U.S. State Department issued a global travel alert for U.S. citizens on Monday, citing increased terrorist threats.

And in Belgium, officials are on a continuing nationwide manhunt for a key suspect of the Paris attacks, Salah Abdeslam, as Brussels remains on lockdown for a fourth day.

Europe's travel stocks took a hit as a result. Accor, the owner of the Sofitel and Novotel hotel chains, closed down in the region of 5 percent.

Airlines Air France-KLM and Lufthansa both closed around 4 percent lower, while Easyjet, IAG and Ryanair also closed sharply lower.

Rolls Royce rallies on restructuring plans

Shares in Britain's Rolls Royce rallied, ending over 3 percent up after the engineering firm laid out a major turnaround strategy after four profit warnings in just over a year.

Zodiac Aerospace ended over 7 percent down, falling to the bottom of the STOXX 600 after reporting a 44.6 percent slump in its 2014/2015 operating profit. Shares in the firm were down as much as 13 percent before paring some losses.


Volkswagen pulls autos higher

The STOXX 600 auto sector failed to hold on to gains despite a rise in share price from embattled German carmaker Volkswagen.

Shares in the auto firm rallied on Tuesday over 5 percent after it said it had found technical solutions for 90 percent of cars affected by its emissions scandal in Europe.

Porsche, which is owned by Volkswagen, was also in the green.

Luxury stocks lose shine

The luxury sector was in Nomura's crosshairs as the broker downgraded its outlook for Hugo Boss, Burberry, Swatch, Prada and Richemont. All of those names were trading lower.

Germany's Hugo Boss said on Tuesday that it expects growth in 2016 to be below its long-term target due to weakness in the U.S. and China. The concerns over China as well as the potential impact of terrorist threats weighed on other retail and luxury stocks.

In business news, U.S. politicians are lining up to slam the mega-merger between Allergan and Pfizer, which will allow Pfizer to move its headquarters to Ireland and lower its corporate tax bill.

Democratic presidential candidate Hillary Clinton was among those condemning the New York-based pharma giant for dodging corporate taxes and she pledged to propose measures to prevent such deals.

On the data front, figures from the influential Ifo institute showed German business morale unexpectedly improved in November.