London's Financial Times-Stock Exchange 100 index fell 18.20 points, or 0.34%, to 5,300.20.
Oil stocks led the downturn as crude oil prices fell back below $65.00: BP fell 1.03% and Royal Dutch Shell lost 0.97%. British Airways (-1.47%) retreated after Citigroup lowered earnings forecasts for this year (8%) and next (2.5%), saying the earnings impact of this month's wildcat strike could be up to £35 million higher still.
Germany's DAX index fell 23.95 points, or 0.48%, to 4,917.74. Germany's ZEW expectations index rose to a better-than-expected 50.0 in August from 37.0 in July, showing the first signs of a domestic pick-up, but German GDP was unchanged quarter-to-quarter in the second quarter.
On the corporate news front, VW (-0.74%) was in talks with DaimlerChrysler (-1.19%) about producing a van for sale in the U.S., reported Handelsblatt. A deal could be signed at the Frankfurt auto show in September.
In Paris, the CAC 40 index fell 49.38 points, or 1.10%, moving to 4,436.56.
A retreat in oil prices was used as an opportunity to cash in on energy stocks: index heavyweight Total lost 1.23%. BNP (-0.91%) was lower, along with most European financial stocks. The stock was also in play on news Fortis Bank made contact regarding a joint venture. Atos (+4.10%) bucked all trends, rallying on talk that Deutsche Telekom's T-Systems unit is studying the option of taking over the French group..However, some brokers see Atos as more of a buyer than a seller right now given the significant new debt facility it arranged earlier this year. Motorway groups ASF (+0.82%), Sanef (+0.68%) and APRR (+0.68%) ended all higher as 18 groups placed bids for some €12 billion worth of shares last night.
Asian markets finished mixed Tuesday.
Japan's Nikkei 225 index added 20.42 points, or 0.16%, to 12,472.93. Large-cap financial plays such as Mizuho Financial were hit by profit taking after leading the market higher yesterday. Bright sentiment toward economic growth provided underlying support for the market, as well as speculation Prime Minister Koizumi will win next month's election.
In Hong Kong, the Hang Seng index gained fell 244.74 points, or 1.61%, to 14,973.89. Stocks in Hong Kong fell sharply as the big rise yesterday failed to inspire any follow-through buying, reports Standard & Poor's MarketScope. Index heavy-weights Hutchison Whampoa and Cheung Kong suffered big losses after being downgraded by Citigroup.