Europe's main stock markets have fallen, extending the previous day's losses, despite improving German investor sentiment as traders chose profits after last week's strong gains.
The benchmark FTSE 100 index dropped 0.47 per cent to 5865.81 points at close in London. Frankfurt's DAX 30 retreated 0.67 per cent to 7354.29 points and in Paris the CAC 40 slumped 0.90 per cent to stand at 3521.61 points.
The Madrid market fell 1.10 per cent and Milan plunged 2.39 per cent.
"It is too early to talk about a trend reversal but rather of digesting after the rises seen over the past ten days," said Renaud Murail, a trader at Barclays Bourse.
Murail said the market "lacked the fuel to go higher" with Spain still a worry, even though the country managed to auction 4.5 billion euros ($A5.67 billion) in short-term debt at lower rates.
US stocks wavered on Tuesday as the aura of the Federal Reserve's new QE3 stimulus wore off and worries about company profits began to set in.
In midday trade, the Dow Jones Industrial Average was unchanged, the S&P 500 lost 0.11 per cent, while the tech-rich Nasdaq dipped 0.05 per cent.
In the end, "the intervention by the European and US central banks to boost the global economy are not managing to reassure over time," said Jerome Vinerier, analyst at IG Markets.
Tech giant Apple soared however, with shares trading above $700 for the first time ever, just days after the launch of its new iPhone 5. At $700, the world's largest company by market capitalisation is worth $656 billion.
In foreign exchange deals, the euro slipped to $1.3059 from $1.3114 on Monday, when the European single currency had hit the highest level for 4.5 months at $1.3172.
Investor sentiment in Germany rose for the first time in five months in September, data showed on Tuesday, as the European Central Bank's new bond-buying program helped boost confidence.
The widely watched investor confidence indicator calculated each month by the ZEW economic institute climbed to minus 18.2 points in this month from minus 25.5 in August.
"This is the first rise in the indicator following four consecutive months of decline," ZEW said in a statement.
"The fact that the indicator remains in negative territory shows that financial market experts are continuing to forecast a cooling down of the German economy in the next six months," the statement said.
"Nevertheless, the end of the downward slide in September suggests that the experts believe the economic weakening will be only moderate."
Though the euphoria had clearly faded, stock market dealers continued to bank profits after last week's huge gains sparked by the US Federal Reserve's stimulus plan.
The US central bank on Thursday said it would start a third round of bond-buying, known as quantitative easing (QE3), in a bid to jumpstart the world's biggest economy.
The announcement, which followed a European Central Bank plan to buy the debt of under-pressure eurozone nations, had injected global markets with some much-needed risk appetite on Friday.
Tuesday's profit-taking was also supported by data showing the Fed's Empire State manufacturing index for the New York region fell for a second consecutive month in September.
Anti-Japan protests across China also weighed, with three of Japan's biggest car makers saying they had closed their factories or cut production in China as a result.
Tokyo and Beijing are locked in a political stand-off over a disputed group of islands in the East China Sea that have seen violent protests across China which have hit shares.