LONDON (AFP) - European equities saw early gains made Tuesday on Chinese central bank action and the IMF revising up its global growth forecast fade away as investors caught a late chill from speculation of further Fed tapering.
London's benchmark FTSE 100 index ended the day down 0.04 percent at 6,834.26 points, while the CAC 40 in Paris edged 0.02 percent to 4,323.87 points.
Frankfurt's DAX 30 added 0.15 percent to 9,730.12 points despite the key ZEW survey showing that German investor sentiment stalled unexpectedly in January.
Milan climbed 0.11 percent but Madrid fell 0.92 percent.
The euro was stable against the dollar.
"After three days of fairly lacklustre sideways trading Europe?s markets made a renewed attempt to push higher today, making new six and a half year highs in the process, before sliding back again," said market analyst Michael Hewson at CMC Markets UK.
European equities were "helped in part by a positive Asia session, which was driven by a Chinese central bank induced liquidity boost, as well as an upgrade to global growth forecasts by the IMF."
Asian equities rallied on Tuesday after the People's Bank of China (PBoC) said late on Monday that it had provided short-term liquidity to some large commercial banks to avert a potential cash crunch.
The central bank also injected 255 billion yuan ($41.8 billion) worth of funds into the interbank market on Tuesday.
Markets also welcomed the International Monetary Fund saying Tuesday that the global economic recovery is strengthening as countries move away from austerity budgets and financial systems improve.
The Fund increased its estimate for world growth this year slightly to 3.7 percent, after 3.0 percent in 2013, although it warned that the rebound of the world economy is still "weak and uneven."
But the strong gains on European indices disappeared as the closing bell approached, dragged down as investors shifted focus to the possibility of the US Federal Reserve deciding to cut the amount of monetary stimulus again at its meeting next week.
Market Analyst David Madded at brokerage IG said US markets pulled back after "...the Wall Street Journal warned that the Fed may continue tapering before the month is out."
While the Fed's tapering can be taken as evidence the US economy is recovering, the funds have propped up equity prices and speculation of stimulus cuts have often hit stocks hard.
The "US reporting season is now in full swing, and Johnson & Johnson and Verizon both exceeded analysts? expectations, but it is like swimming against the tide as traders' fears of tapering overwhelm the markets," added Madden.
The Dow Jones Industrial Average fell 0.67 percent to stand at 16,348.83 points in midday trading.
The broad-based S&P 500 slid 0.14 percent to 1,836.18, while the tech-rich Nasdaq Composite Index added 0.11 percent to 4,202.04.
In European company news on Tuesday, Renault said sales rose by 3.1 percent in 2013 to 2.63 million vehicles thanks to accelerating performance by its low-cost Dacia brand.
But the growth rate for 2013 was below that of the overall market, and the company's shares slid 0.16 percent to 67.89 euros.
Shares in Alstom plunged 13.8 percent to 23.93 after the group revealed it would take longer than expected to achieve a promised increase in its operating margins.
The company is suffering from a crisis in the sector of gas-powered electricity power stations. Competition has increased from renewable sources of energy and from a sharp fall in the price of coal for coal-powered stations, a knock-on effect of the boom in shale energy in North America.
In London, Anglo-Dutch food and cosmetics group Unilever saw its share price rally 1.8 percent to 2,480 pence after news of soaring annual earnings.
Net profits surged 11.0 percent to 4.84 billion euros in 2013, despite a modest dip in sales, the group said in a results statement.
In foreign exchange activity on Tuesday, the European single currency edged up to $1.3555 from $1.3552 late on Monday in New York.
The euro dipped to 82.31 pence from 82.48 pence on Monday, while the pound rose to $1.6468 from $1.6414.
Gold prices slipped to $1,238 an ounce from $1,255.75 on Monday on the London Bullion Market.