(Reuters) - European markets ended mixed Tuesday in thin trade as firmer crude prices boosted energy stocks, although the market cut gains after sources said German Chancellor Angela Merkel was against a raising of the funding limit for Europe's future bailout fund.
The FTSEurofirst 300 index of top European shares provisionally closed 0.5 percent higher at 972.12 points after rising to a high of 978.94 earlier in the session.
Merkel's comments prompted investors to take some positions off the table very quickly after a very strong run in the recent past. We have started to see lower volumes as well, which make the moves exaggerated, said Joshua Raymond, Chief Market Strategist at City Index.
Volumes were low, at around three quarters of the 90-day daily average.
The oil and gas sector topped the sectoral gainers' list, up 2 percent after U.S. crude futures rose more than 2 percent to trade near $100 a barrel.
The mood darkened as ratings agency Moody's said it would review ratings of all EU member states in the first quarter of 2012, while rival Fitch said the summit had failed to provide a comprehensive solution to the debt crisis.
Banks again were among the top fallers as balance sheet concerns compounded by Europe's ongoing debt troubles continue to scare investors off.
Despite valuation support, the economic and sovereign outlooks provide headwinds, Nomura said in a note, in which the broker cut its pan European banking sector rating to neutral from bullish.
Short-term headwinds for the sector have increased sharply in 2H11. Policymakers have repeatedly failed to address the causes and concerns of the sovereign crisis, leading to much higher funding costs and forced deleveraging for the banking sector, a source of ongoing earnings risk.
Elsewhere, Whitbread fell 5.5 percent after Britain's biggest hotel operator said sales growth slowed in the third quarter as tough economic conditions kept customers away from its Premier Inn hotels and Costa Coffee shops.
The stock is not expensive ... However, we struggle to identify catalysts for outperformance, Panmure Gordon said, reiterating its hold recommendation and 1,800 pence target price on the stock.
Reuters Staff Writer David Brett contributed to this report