Global investors were largely fretting about the potential of a trade war on Wednesday after the resignation of Donald Trump's economic advisor Gary Cohn. The exit of Mr Cohn, a staunch free trade supporter, from the White House made the imposition of steel and aluminium tariffs more likely.
The two-day rally of British stocks ran out of steam as a result of the news from the US, while Irish markets performed well and edged up on the day.
Ireland's benchmark Iseq overall index edged up 0.43 per cent on Wednesday buoyed by further gains in packaging company Smurfit Kappa. The group rose 6.3 per cent to €36 in Dublin trading after the Irish group's board reaffirmed its rejection of a takeover offer from its US rival.
Other sectors, including financials, had more mixed results on the day with AIB advancing 1.35 per cent to €5.24, while rival Bank of Ireland dropped marginally to €7.445.
It was a downbeat day in the property sector with Cairn Homes falling 0.11 per cent to €1.776 on decent volume and Glenveagh dropping 1.14 per cent to €1.12.
Budget airline Ryanair recovered some ground on the day after suffering somewhat last week as a result of the weather. Europe's largest airline by passenger numbers closed up 0.79 per cent to €16.
Rolls-Royce was the biggest gainer on the FTSE on Wednesday after it posted a 25 per cent rise in pretax profit to £1.071 billion, beating a consensus forecast of £878 million. Shares in the company, which had recorded a loss in 2016, were up 11.46 per cent.
Oil prices tumbled, sending oil majors BP and Royal Dutch Shell down 0.33 and 0.89 per cent respectively.
Just Eat shares recovered slightly from the previous day's results-driven losses, up 3.2 per cent.
Paddy Power Betfair shares however fell 3.41 per cent, and were the worst-performing on the FTSE in early trade before recovering some losses after the betting company reported full-year results in which analysts said lower guidance disappointed investors.
WPP was also a notable faller, down 3.9 per cent after the latest blow to the advertising agency model which has come under increased pressure.
European shares clawed back losses on Wednesday as deal-making speculation reinvigorated trading following a muted start to the session.
The pan-European Stoxx 600 index ended with a gain of 0.4 per cent, climbing steadily through the day and shaking off worries over the resignation of Mr Cohn from the White House.
Shares in tech stocks led gainers with a 1.2 per cent rise, while autos advanced 0.6 per cent.
Renault was the biggest auto gainer, up 5.6 per cent following a Reuters report that Nissan was in talks with the car maker to buy the bulk of the French state's 15 per cent Renault holding.
Also among French stocks, shares in ADP jumped 6.1 per cent after a media report said the government would go ahead with plans to privatise the French airport operator and sell its 50.6 per cent stake entirely.
Among the fallers, the advertising sector retreated after the Financial Times said P&G would cut agency spending by $1.25 billion over three years.
France's Publicis and Britain's WPP fell 1.9 per cent and 3.9 per cent respectively.
The Dow fell as much as 1 per cent at opening before trimming some of those losses as markets again debated how serious Mr Trump was about a protectionist shift that economists say could damage growth worldwide.
Shares of manufacturing titans Boeing and Caterpillar were hit hard, slipping about 1 per cent on worries about higher input costs and trade barriers outside the United States.
General Electric dipped after Deutsche Bank analysts warned of the potential impact from Trump's planned tariffs on steel and aluminium.
– Additional reporting, Reuters