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European stocks slipped on Tuesday following disappointing US retail sales data, having largely taken in stride a Moody's ratings cut on six European nations overnight due to the eurozone crisis.

Moody's also overnight placed on negative outlook three other countries, including France and Britain, but the main European markets were all in positive territory in midday trading.

However markets slipped after the US Commerce Department said January retail sales rose by 0.4 percent from December. While that was the biggest gain since October, the increase was only half as large as analysts expected.

London's benchmark FTSE 100 index ended the day down 0.10 percent at 5,899.87 points. In Frankfurt, the DAX 30 dipped by 0.15 percent to 6,728.19 points and in Paris the CAC 40 fell 0.26 percent to 3,375.64 points.

In foreign exchange deals, the European single currency slipped to $1.3154 from $1.3191 late on Monday in New York.

US stocks were also down, with the Dow Jones Industrial Average dipping 0.17 percent to 12,852.58 points after the first five minutes of trade.

The broad-based S&P 500 dropped 0.30 percent to 1,347.72 points, while the tech-heavy Nasdaq Composite lost 0.37 percent to 2,920.49 points.

"Last night's ratings action by Moody's didn't really tell markets anything they didn't already know and the initial moves in equity markets reflected this new reality, with the FTSE pushing back above the 5,900 level," said CMC Markets UK analyst Michael Hewson.

"In the short term, however, investors appear to have found the air a little thin at these levels and the market turned lower in the afternoon session, after US retail sales came in somewhat mixed and largely below expectations," he added.

Overnight, Moody's chopped the debt ratings of Italy, Spain and Portugal and put top 'Aaa'-rated France, Britain and Austria on warning, arguing that they were increasingly vulnerable to the long-running eurozone crisis.

Austria, France and Britain were all put on negative outlooks -- a warning that if conditions worsen they could be hit with full downgrades.

However investors took cheer from the ZEW think tank's widely watched barometer of German investor confidence surged to its highest level in 10 months.

The ZEW index rose by a bigger-than-expected 27 points from negative territory to stand at plus 5.4 points for February.

It is the first time since May 2011 that the index has been positive and is the highest reading since April 2011.

"Worse than expected retail sales data out of the US forced stocks lower in afternoon European trading and countered much of the support gained from better than expected German ZEW sentiment data in the morning session, which had earlier lifted stocks from their Moody's rating warning induced lows," said Joshua Raymond, Chief Market Strategist at City Index

Markets are also keeping an eye on developments regarding Greece.

European finance ministers were expected to meet Wednesday in Brussels to sign off on the Greek deal necessary for a Europe-sponsored rescue package, followed by an offer to private sector holders to write-down by about a half their holdings of Greek government bonds.

A source said after the markets closed however that the meeting might be postponed.

Asian markets were mostly lower on Tuesday after Moody's action.

In Asian markets, Shanghai shed 0.30 percent, Seoul ended down 0.15 percent and Sydney closed 0.99 percent lower.

However, Tokyo clawed back early losses to close up 0.59 percent after the Bank of Japan said it was easing monetary policy by pumping an extra 10 trillion yen ($130 billion) into an asset purchase programme, aimed at battling the deflation that has wracked Japan's economy for years.

AFP