The ZEW economic sentiment index for the 17-nation euro zone, which gauges the six-month economic outlook, rose sharply to 58.6 in September, significantly up from the 44 points recorded in August and beating analysts' expectations of a reading of 46 for the month.

The ZEW index for Germany increased by 7.6 points to hit 49.6 points in September, up from the 42 points registered in the previous month. Analysts had expected a reading of 46 points.

"The financial market experts hold the view that the German economy is still gaining momentum. In particular, the experts’ economic optimism has increased due to the improved economic outlook for the euro zone -- although recently released economic data for Germany have fallen short of expectations," ZEW President Clemens Fuest said, in a statement. 

In the UK, the consumer price index in August slowed fractionally to 2.7 percent, from 2.8 percent in the previous month, in line with analysts' expectations, while producer prices declined by 0.2 percent in August, compared to a rise of 1.2 percent in July and against economists’ expectation of an increase of 0.2 percent, data released Tuesday by the Office for National Statistics showed.

The core CPI, held steady at 2 percent year-on-year in August, while economists had estimated a modest increase of 2.1 percent. Inflation, as measured by the retail prices index and the house price index, both rose to 3.3 percent in August from 3.1 percent in July.

ONS attributed the decline in inflation to a “fall in the transport (particularly motor fuels and air transport) and clothing sectors …” while prices of furniture, household equipment & maintenance witnessed a sharp increase in August.

Following the data release, London’s FTSE 100 was down 0.34 percent, Germany's DAX-30 was down 0.18 percent and France's CAC-40 was trading down 0.32 percent, as markets chose to focus on the upcoming two-day meeting of the U.S. Federal Open Market Committee beginning Tuesday that could determine the future of the Federal Reserve's massive $85 billion-a-month bond-buying program.