This is CNBC's live blog covering European markets.

LONDON — European markets pulled back on Tuesday as investors braced for significant inflation data due later this week and reacted to a shock banking tax announcement out of Italy.

The pan-European Stoxx 600 index ended 0.2% lower, with banks shedding 2.7% to lead losses as most sectors slid into the red. Healthcare stocks bucked the trend to add 3.2%

Italian lenders took a hit from the government's surprise announcement of a 40% windfall tax on banking profits, dragging down the banking sector. The positive session for health care came after a strong drug trial result from Danish pharmaceutical firm Novo Nordisk.

The European blue chip index closed Monday's session up 0.1% as markets appeared to enter suspended animation after last week's global pullback, as investors took profits near the end of earnings season and risk sentiment returned to focus.

Consumer price index releases are due from China on Wednesday and the United States on Thursday, with analysts expecting the former to report disinflation of 0.5% year on year, which would ease global price pressures but could signal that more fiscal stimulus is needed from Beijing.

The U.S. figure will be closely watched in the context of the Federal Reserve's next monetary policy decision in late September, as markets try to gauge whether the central bank will tighten further and for how long interest rates will remain high. A Reuters poll of economists produced a consensus forecast for the July print of 3.3% year on year, up from 3% in June.

Shares in Asia-Pacific were mixed on Tuesday as China's July trade data tumbled more than expected, while U.S. stocks retreated amid a decline in bank shares.

Roughly 85% of S&P 500 stocks have reported quarterly results, and nearly 80% of them have beaten Wall Street's expectations, according to FactSet.

Back in Europe, Deutsche Wohnen, Porsche, Bayer, ABRDN and Glencore all reported Tuesday.

Strategist says it is ‘entirely possible’ other countries will follow suit with windfall taxes on banks

It is "entirely possible" countries will follow suit to impose windfall taxes on domestic banks following Italy's surprise move to approve a one-off 40% tax on profits reaped from higher interest rates, one strategist told CNBC on Tuesday.

Italy is just the latest country to impose windfall taxes on the banking sector. Countries such as Spain and Hungary have already introduced similar measures.

"I think it is entirely possible" other countries could follow suit with windfall taxes on lenders' profits, Paul Markham, head of global equities at Newton Investment Management, told CNBC's "Squawk Box Europe."

"I think that would be according to the color of the government, whether or not the banking system in terms of capital etcetera is particularly healthy in one country or another," he added.

"Where there is excess capital I think it is more likely, and where, of course, there is a political event — an election or whatever coming up — that's likely to make it more probable as well I would say."

— Sam Meredith

Novo Nordisk soars 15% as Wegovy drug trial tops expectations

Shares in Danish pharmaceutical company Novo Nordisk soared more than 15% on Tuesday after headline results from a trial showed that its weight-loss drug Wegovy cut the risk of heart disease by 20% in adults with obesity.

The result lifted the broader sector in Europe and the U.S., with shares in stateside rival Eli Lilly climbing in pre-market trade.

— Elliot Smith

Moody's cuts credit ratings of 10 U.S. banks, places some big names on negative review

Moody's cut the credit ratings of a host of small and mid-sized U.S. banks late Monday and placed several Wall Street big names on negative review.

The ratings agency cut the ratings of 10 banks by one rung, while major lenders Bank of New York Mellon, U.S. Bancorp, State Street, Truist Financial, Cullen/Frost Bankers and Northern Trust are now under review for a potential downgrade.

Moody's also changed its outlook to negative for 11 banks, including Capital One, Citizens Financial and Fifth Third Bancorp.

Among the smaller lenders receiving an official ratings downgrade were M&T Bank, Pinnacle Financial, BOK Financial and Webster Financial.

— Elliot Smith

Glencore down 4% after profits halve on weaker commodity prices

London-listed Swiss mining giant Glencore saw its shares fall 4% on Tuesday morning after reporting a 50% year-on-year fall in first-half earnings on the back of easing commodity prices.

Earnings before interest, tax, depreciation and amortisation halved to £9.4 billion in the first six months of the year, partly driven by retreating coal prices.

"While the company has announced an impressive $2.2 billion "top-up" in shareholder capital returns, bringing the total capital returns for 2023 to $9.3 billion, this also fell short of expectations," said Jamie Maddock, equity research analyst at Quilter Cheviot.

"These returns landed at the low end of consensus, considered 'light' relative to what many had anticipated. Glencore's self-imposed capital return framework and potential M&A activities appear to have constrained these returns, hinting at a more cautious approach in the current market climate."

— Elliot Smith

European consumers expect lower inflation, but weaker income growth

Euro zone consumers expect inflation to continue cooling over the next few months and years but remain downbeat about real income growth and house prices, according to the European Central Bank's monthly consumer expectations survey.

The median respondent to the June survey expected inflation to average 3.4% over the next 12 months, down from 3.9% in May, and to fall to 2.3% in three years' time.

However, consumers expect their income to grow at 1.2% over the next 12 months, suggesting reduced living standards and savings rates as inflation outpaces pay. The mean respondent also suggested housing prices will grow by just 2.1% over the next year.

— Elliot Smith

Italian banks sink after surprise windfall tax announcement

Shares of Italian banks took a hit on Tuesday after Italy's cabinet approved a 40% windfall tax on lenders' profits for the remainder of 2023.

As of 2:32 p.m. in Rome, BPER Banca shares were 10% lower and Banco BPM shares dropped 9%, while Intesa Sanpaolo and Finecobank were both down more than 8% and UniCredit fell more than 6%.

Italian Deputy Prime Minister Matteo Salvini told a press conference on Monday that the 40% levy on banks' extra profits, amounting to several billion euros, will be used to cut taxes and offer financial support to mortgage holders.

— Elliot Smith

European shares open lower

The pan-European Stoxx 600 index slipped 0.3% at the open, with mining stocks shedding 1.4% to lead losses as most sectors and major bourses traded in the red.

Here are the opening calls

Britain's FTSE 100 is seen around 11 points lower at 7,544, Germany's DAX is set to dip by around 22 points to 15,929, and France's CAC 40 is expected to drop around 5 points to 7,315, according to IG data.

CNBC Pro: Morgan Stanley says Europe's renewable energy push will cost $5 trillion — and names stocks to play it

Morgan Stanley named several stocks to play Europe's investment in renewable energy — and highlighted a "once-in-a lifetime" opportunity in the electricity sector in particular. 

The bank estimated the transition to green power sources will cost around 5 trillion euros ($5.5 trillion) between now and 2030.

CNBC Pro subscribers can read more here.

— Lucy Handley

CNBC Pro: Hedge fund manager Dan Niles says S&P 500 could fall by 10% — and names 2 stocks he likes

The S&P 500 could decline by 10% by the end of the year to correct for a recent rise in valuation multiples, according to hedge fund manager Dan Niles.

The portfolio manager said he sees several macro-economic headwinds that make valuing the S&P 500 at current levels "much more difficult".

He also revealed his latest two Big Tech stock ideas.

CNBC Pro subscribers can read more here.

— Ganesh Rao

CNBC Pro: Top tech investor names 5 tech stocks to buy — and says 2 still have 'a lot of upside'

Top tech investor Paul Meeks says he'll likely buy the dip in stocks, as he doesn't expect a significant and long-lasting downturn, he told CNBC.

He names the ones in tech that he's bullish on, including two titans and one small-cap stock he says is "too cheap."

CNBC Pro subscribers can read more here.

— Weizhen Tan