(MENAFN - AFP) European stock markets retreated Tuesday as traders banked profits from the previous day's rally, overlooking a positive German survey to concentrate on happenings within the US Federal Reserve.
London's benchmark FTSE 100 index fell 0.37 percent to stand at 6,598.29 points in midday deals.
Frankfurt's DAX 30 lost 0.22 percent to 8,594.16 points and the CAC 40 in Paris slipped 0.33 percent to 4,138.48 points.
European equities had rallied Monday after former US treasury secretary Larry Summers withdrew from the race to lead the US Federal Reserve, raising traders' hopes that a Fed stimulus wind-down would not be rushed.
Frankfurt closed at a record-high 8,613 points on Monday.
In London on Tuesday, the British government earned 3.2 billion from selling six percent of Lloyds Banking Group, placing the part-nationalised lender on course for a full return to the private sector.
LBG shares were down 2.42 percent at 75.49 pence in Tuesday trading, but still above the 75 pence-per-share sale price.
Eyes were on also the car sector following data showing European auto sales fell five percent in August to about 654,000 vehicles.
Dashing hopes of a nascent recovery for the sector, new car registrations across the European Union -- with the exception of Malta, for which data were unavailable -- came in at 653,872 last month, the European Automobile Manufacturers' Association (ACEA) said Tuesday.
PSA Peugeot Citroen shares lost 3.0 percent of their value in response, Renault gave up 1.80 percent and BMW dropped 0.63 percent.
On a positive note, investment sentiment in Germany rose to its highest level in more than three-and-a-half years in September amid growing optimism in Europe's biggest economy, a new survey found.
The widely watched investor confidence index calculated by the ZEW economic institute rose by 7.6 points to 49.6 points in September, the institute said in a statement.
That was fractionally higher than analysts' forecasts for an increase to around 49 points this month, and was the highest level since December 2009.
"Financial market experts hold the view that the German economy is still gaining momentum," said ZEW president Clemens Fuest.
"In particular, the experts' economic optimism has increased due to the improved economic outlook for the eurozone, although recently released economic data for Germany have fallen short of expectations."
Elsewhere, the eurozone trade surplus increased in July compared with June, official data showed Tuesday, providing another sign of a tentative recovery from a record recession.
In foreign exchange trade, the euro climbed to 1.3353 from 1.3337 on Monday. The dollar grew to 99.19 yen from 99.11 yen.
The British pound was mixed against the euro and dollar in the wake of official figures showing British annual inflation had fallen to 2.7 percent in August from 2.8 percent in July.
The price of gold dropped to 1,319.71 an ounce on the London Bullion Market, from 1,324 Monday.
Elsewhere, Asian stock markets mostly closed lower on Tuesday as a broadly positive lead from Wall Street was offset by caution before the US Federal Reserve's policy meeting, traders said.
Profit-takers moved in after Monday's gains, which were fuelled by the decision of fiscal hawk Summers to quit the race to become the next Fed chairman.
With few catalysts to drive buying, the focus is on the two-day Fed meeting that ends Wednesday. While investors expect policymakers to begin winding down the 85 billion-a-month stimulus programme, the key question is the pace of the drawdown.
Global shares turned upwards on Monday after Summers withdrew from the running to replace Ben Bernanke as Fed boss.
Summers is widely considered a monetary hawk who many feared would have overseen a brisk wind-down of the bank's bond-buying scheme, which has been credited with fuelling a rally in world markets.