European markets closed higher, but off session highs on Tuesday, as worse-than-expected factory data for the euro zone dented investor sentiment.
The FTSEurofirst 300 Index provisionally closed 0.3 percent higher at 1,211.07 points, after trade volumes of only two-thirds the 90-day average. The pan-European index is down 4 percent since the U.S. Federal Reserve discussed tapering off its bond purchases in its policy meeting notes last month.
On Tuesday, European shares pared gains after producer price data for the euro zone missed expectations, showing a 0.6 percent month-on-month drop in April. It marked the biggest monthly decline since July 2009, according to the EU's statistics office.
Earlier in the day, stocks got off to a positive start after Spanish jobless numbers showed a 2 percent decline for May. The country's labor ministry said that the number of job seekers had fallen by 98,265, the largest drop in the month of May ever. The Spanish IBEX 35 closed provisionally 0.8 percent higher.
In the U.K., retail sales rose 1.8 percent last month, year-on-year, the British Retail Consortium reported on Tuesday.
(Read More: Coldest Spring in 50 Years Fails to Deter UK Shoppers)
Also in the U.K., UBS analysts raised their outlook on London's FTSE 100, predicting it will end the year at 7,000 points. UBS also saw 8 percent upside for the Euro Stoxx 600 Index.
In other news, the European Commission is to propose a powerful new authority charged with winding down struggling euro zone banks, according to a draft proposal reported by The Wall Street Journal.
In stocks news, shares of chipmaker STMicro closed aroun 4.5 percent higher after reports that CEO Carlo Bozotti said he expects orders to grow by 5-to-10 percent this year. Rival Infineon also close higher.
Societe Generale received an upgrade from Goldman Sachs to a "buy" from a "neutral"; shares in the French bank closed around 1.4 percent up.
Dutch grocery chain Ahold quadrupled a share buyback to 2 billion euros ($2.6 billion) on Tuesday, in order to redistribute excess cash following the sale of a stake in Swedish retailer ICA.
(Read More: Grocer Ahold Ups Share Buyback as Recovery Beckons)
