European stock markets wilted on Tuesday, in line with early trading on Wall Street, as investors took profits from big gains the day before.

The London FTSE 100 index shed 0.68 percent to close at 5345.93 points while in Paris the CAC 40 fell 0.88 percent to 3829.06. The Frankfurt Dax lost 0.45 percent and finished at 5778.43.

Elsewhere there were declines of 0.33 percent in Brussels, 0.34 percent in Amsterdam, 1.01 percent in Milan and 0.23 percent in Madrid.

US stocks likewise gave ground in early deals day after hitting fresh 2009 highs on data bolstering sentiment that the US recovery was on track.

The Dow Jones Industrial Average was down 0.23 percent at 10 383.23 at mid-day while the tech-heavy Nasdaq composite had fallen 0.40 percent to 2189.11.

Investors in Europe and the United States turned cautious and locked in profits as they digested more economic data Tuesday and despite mostly positive news on the third quarter corporate earnings front.

Interest rate concerns dogged the US market after a central bank official suggested that it was "far from clear" whether the Federal Reserve should use rates to stem a surge in financial leverage.

"The comments are adding more caution to the wind this morning as stocks take a breather following the gains," said Briefing.com analyst Patrick O'Hare.

Federal Reserve Bank of San Francisco President Janet Yellen said "higher rates than called for based on purely macroeconomic conditions may help forestall a potentially damaging buildup of leverage and an asset-price boom."

On the economic front, the Labor Department said Tuesday that US producer prices rose 0.3 percent in October, highlighting tame inflation at the wholesale level.

Trading was featureless in Europe, tracking the lackluster start to the day on Wall Street.

In London mining companies fell sharply after a surge on Monday, powered by another record-setting day for gold. Lonmin gave up 3.28 percent, Rio Tinto 2.19 percent and Anglo American 1.62 percent.

By contrast telecom operator Cable and Wireless shot up 1.74 percent after outlining details of its plan to divide itself into two companies.

In Paris banks were shunned, with Societe Generale losing 3.11 percent and Deixia 3.47 percent.

In Frankfurt fertiliser group K+S shot up 4.50 percent on speculation that famed US financier Warren Buffet could take a stake in the company. Questioned by the AFP the group had no comment.

Flag carrier Lufthansa fell 2.08 percent after its vice president, Christoph Franz, told the Financial Times Deutschland that 2010 would be "difficult" for the company. Lufthansa is already grappling with weakening demand and competition fron low-cost airlines.

Asian markets were mostly lower on Tuesday.

Hong Kong lost 0.13 percent after hitting a more than 15-month closing high Monday, while Sydney ended 0.54 percent down. Tokyo drifted 0.63 percent lower.

Shanghai ended up 0.24 percent, but gains were capped by cautious investor sentiment following a report that Beijing planned to review its economic policy sooner than expected.