Europe's main stock markets were largely unchanged on Tuesday, after reversing earlier gains when EU ministers ended talks in Brussels without reaching a deal on a European-wide banking union.
Sentiment early in the session had been boosted by a Greek debt-buyback programme and the approval by eurozone finance ministers of a bailout for Spain's troubled banks.
But at close, London's FTSE 100 index of leading companies edged 0.08 percent lower to 5,869.04 points, on the eve of the British government's budget update and latest economic growth forecast.
In Frankfurt, the DAX 30 was virtually unchanged at 7,435.21 points, while in Paris the CAC 40 added 0.39 percent to 3,580.48 points.
The European single currency meanwhile rallied to a seven-week peak at $1.3107, before easing back to $1.3080, compared with $1.3051 late in New York on Monday. Gold prices however sank to $1,697.75 an ounce on the London Bullion Market, from $1,720.
US shares also struggled for direction on Tuesday as a budget impasse in Washington continued to weigh on Wall Street sentiment.
The Dow Jones Industrial Average rose 0.16 percent in midday trade, while the broad-market S&P 500 edged down 0.08 percent and the tech-rich Nasdaq Composite fell 0.27 percent.
"With the economic calendar empty, the unresolved fiscal cliff is likely to continue to command the lion's share of the Street's attention," said Charles Schwab & Co. analysts.
US politicians have until the end of the month to agree a deal on cutting the country's huge deficit and avoid a fiscal cliff of huge tax hikes and spending cuts widely expected to tip the economy into recession if allowed to take effect.
Finance ministers from the 27-member European Union met on Tuesday to discuss policing the banking sector more effectively from September 2013 to prevent another global financial crisis.
After nearly four hours of talks, ministers said more time was needed and called for a fresh gathering next week.
Proposed new safeguards are part of wider moves towards fuller economic and political integration deemed necessary to break the vicious circle between government and bank debt that has brought the European economy to a standstill.
Amid the talks on banks, in London, Royal Bank of Scotland shares gained 1.06 percent, while over in Frankfurt, Commerzbank stock jumped 1.46 percent and Deutsche Bank shares rallied 1.66 percent.
In Italy, shares in troubled Banca Monte dei Paschi di Siena soared 6.86 percent, followed by Ubi Banca, up 4.26 percent and UniCredit, which was up by 2.51 percent.
And in Paris, lenders Credit Agricole and Societe Generale saw their share prices soar by 2.03 percent and 2.04 percent.
On Monday, Greece launched a bid to buy back privately held debt at a big discount, freeing eurozone finance ministers to approve 39.5 billion euros ($51.3 billion) to recapitalise Spanish banks next week.
The debt buyback is the underlying condition for Greece to receive a crucial 43.7-billion-euro instalment of bailout funds from the European Union and International Monetary Fund.
Asian markets were mixed Tuesday following weak US manufacturing data and fears over the US budget talks.
Tokyo fell 0.27 percent, Sydney eased 0.62 percent and Seoul lost 0.25 percent, while Hong Kong was 0.15 percent higher and Shanghai rose 0.78 percent.