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Europe sinks at close on global growth fears, but BoE boosts FTSE

Continental European stocks finished sharply lower on Tuesday, as a fall in oil prices and concerns over global economic growth offset positive sentiment from new measures from the Bank of England (BoE).

The pan-European STOXX 600 closed near-session lows, ending 1.7 percent down provisionally, with France's CAC and Germany's DAX closing 1.7 percent and 1.8 percent lower respectively.

However, the U.K.'s FTSE 100 rose in afternoon trade, closing up 0.35 percent, although the domestically-focused FTSE 250 fell 2.4 percent.

This came as sterling fell below $1.31 for the first time since September 1985 during trade. At the close, it stood at $1.304 against the dollar, before briefly falling below $1.30.

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FTSE
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DAX
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CAC
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IBEX 35
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The BoE cut the counter-cyclical capital buffer rate for U.K. banks with immediate effect to 0 percent from 0.5 percent of financials' U.K. exposure on Tuesday. This will reduce regulatory capital buffers by £5.7 billion ($7.5 billion), raising banks' capacity to lend to households and businesses by up to £150 billion.

"Those U.K. households and businesses who want to seize viable opportunities … can be confident that they will be supported by the financial system," Bank of England Governor Mark Carney said at a media conference.

Italian banks in focus

Italian banks were again in focus amid concerns over their health. Trade in shares of Banca Monte dei Paschi di Siena was halted during the session. Shares closed more than 19 percent lower. This came after the European Central Bank asked BMPS to slash its bad debts by over 40 percent in three years, Reuters reported.

"The fact is the Italian government is up the proverbial creek without a paddle with its banks, unable to bail them out and stuck with a portfolio of up to 360 billion euros ($400 billion) of non-performing loans that are strangling the life out of the Italian economy," Michael Hewson, chief market analyst at CMC Markets, said in a Tuesday note.

"Of those loans Monte di Paschi, it is estimated, has about 48 billion euros worth, and with a market capitalization of about 1 billion euros, it's not hard to see where its problems lie."

Other Italian banking stocks pared Monday's losses on Tuesday. UniCredit closed up 0.7 percent after Goldman Sachs raised its outlook on the stock from "neutral" to "buy," citing that the bank's new management, Reuters reported. UBI Banca closed 1.4 percent higher.

Meanwhile, Switzerland's UBS sank 3.9 percent after it received a disclosure order from the Swiss Federal Tax Administration to provide information on tax matters. The request concerned current and former French-domiciled clients from 2006 to 2008.

Brexit fallout continues

Elsewhere, the fall out from the Brexit vote continued, with three U.K. real estate funds halting trade this week. Standard Life, Aviva and M&G Investments have suspended dealing in these funds. has both investors and fund managers worried about the consequences on the broader sector.

Shares in Standard Life closed 5.2 percent lower on Tuesday and Aviva ended almost 4 percent down.

U.K. housebuilder Persimmon posted a 12 percent rise in revenue in the first half of fiscal 2016, but said it was too early to judge the effect Brexit could have on Britain's real estate market. Despite the positive results, Persimmon shares slipped more than 7 percent, along with other housebuilders such as Bovis Homes and Taylor Wimpey.

In the telecoms space, CK Hutchison Holdings and Vimpelcom are in talks with Iliad to create a fourth Italian telecoms network operator, Reuters reported, citing two people familiar with the matter. Iliad shares closed almost 3 percent down.

Meanwhile, autos closed down 3.3 percent as a sector. This came after Germany's cartel office said six car manufacturers and suppliers had their offices searched on June 23, as part of an investigation into steel price fixing; according to Reuters.

On the oil front, prices in both Brent and U.S. WTI tumbled over 4 percent each by Europe's close—trading around $47.90 and $46.75 respectively—as concerns that a potential slowdown in economic growth may sap demand and force prices lower. The anxiety over global growth pushed U.S. stocks lower too.

In Asia, markets finished mostly lower, with shares in Australia falling amid an uncertain election outcome and an on-hold central bank. Chinese mainland markets bucked the trend however, trading slightly up on the back of positive services sector data.

—CNBC's Katy Barnato contributed to this report. Follow CNBC International on Twitter and Facebook.