Europe shares end lower after earnings; Alcatel surges 15%

European shares finished lower Tuesday, amid investor caution over a European Central Bank (ECB) meeting this week and the official start of the first-quarter earnings season.

The pan-European Euro Stoxx 600 Index (^STOXX) closed around 0.5 percent lower, with most major bourses and sectors trading in negative territory.

Shares of Alcatel-Lucent (Euronext Paris: ALU-FR) surged 15 percent after Finland’s Nokia (Helsinki Stock Exchange: NOK-FI) confirmed that it is in “advanced” merger discussions with the French telecoms company.

Nokia shares, meanwhile, were down as much as 6 percent in early deals, before rebounding to finish 3.6 percent lower. Shares of luxury brand LVMH (Euronext Paris: MC-FR) slipped to close around 2.5 percent lower after releasing first-quarter sales figures that were broadly in line with market expectations. The French CAC (Euronext Paris: .FCHI) closed around 0.7 percent lower.

German stocks (^GDAXI) provisionally ended 0.9 percent lower, while London’s FTSE (FTSE International: .FTSE) closed 0.1 percent higher.

Read More Nokia confirms merger talks with Alcatel-Lucent

Elsewhere, Germany’s BMW (XETRA:BMW-DE) saw its shares fall around 1 percent Tuesday, despite the car manufacturer reporting its best-ever sales figures for the month of March.

Read More LVMH spirits sales beat, but fashion disappoints

In general, market sentiment in Europe has softened after stellar gains last week on the back of extra liquidity by the ECB, with the central bank set for a rate decision and a press conference Wednesday.

“It was perhaps inevitable that a new week would see a pause for breath, as investors look around for fresh catalysts to drive the next leg higher,” Michael Hewson, the chief market analyst at CMC Markets, said in morning note. “For now these catalysts seem a little thin on the ground.”

U.S. stocks traded in a narrow range on Tuesday as investors digested the first of the major earnings reports and moderate economic data.

JPMorgan’s net income rose to $ 5.91 billion, or $ 1.45 per share, in the first quarter ended March 31, from $ 5.27 billion, or $ 1.28 per share, a year earlier, according to Reuters. CEO Jamie Dimon said the company is getting safer and stronger, as well as gaining market share. JPMorgan shares climbed over 1 percent in afternoon trade.

Johnson & Johnson beat on both the top and bottom lines but reported an 8.6 percent decline in quarterly profit as the impact of a strong dollar on overseas revenue offset growing sales of its mainstay older drugs.

Oil markets will also be in focus Tuesday following the Organization of the Petroleum Exporting Countries’ (OPEC) stinging critique on Monday of oil-producing countries that had refused to follow its lead in holding back supply in an effort to boost prices.

U.S. crude oil futures rose above $ 52 a barrel in early Asian trade Tuesday, stoked by concerns over Iran’s nuclear program and Middle East tensions, while forecasts of a further build in crude stocks capped gains, Reuters reported.

Greece remains firmly in focus after denying a report on Monday by the Financial Times that it was preparing for a debt default if it did not reach a deal with its creditors by the end of the month. Rather, it insisted that negotiations were proceeding “swiftly” towards a solution.

In the U.K., with less than a month before the country’s general election, political parties are releasing their manifestos this week. On Monday, the Labour party published its plans for government and on Tuesday, Prime Minister David Cameron is expected to present his Conservative party’s manifesto. Labour was just one point ahead of the Conservatives in the latest YouGov poll on Monday evening.

U.K. inflation data on Tuesday showed that the country narrowly missed out on deflation, with price growth steady at zero percent in March.

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