European stocks relinquished intraday gains as renewed investor concerns over artificial intelligence pressured the tech sector downward. The UK's FTSE 100 outperformed after data showed inflation fell more than expected.

The Stoxx Europe 600 index closed nearly flat after rising as much as 0.5% earlier. Technology stocks led declines, tracking weakness in US tech shares following reports that Blue Owl Capital would not support software giant Oracle's next $10 billion data center deal.

The FTSE 100 climbed 0.9% as UK inflation dropped to an eight-month low, virtually cementing expectations for a Bank of England rate cut on Thursday.

DBV Technologies SA surged 20% after announcing its experimental skin patch for peanut-allergic children met primary endpoints in late-stage trials. Mining and telecom stocks also outperformed.

The European benchmark index continues hovering near record highs as investors bet on resilient global growth and lower borrowing costs next year. The gauge is poised for a sixth consecutive monthly gain - its longest winning streak since 2021.

"In the very near term, markets remain clearly on a very bullish path, but this will eventually end," said Valerie Charriere, head of European large caps at BNP Paribas Asset Management. "We therefore prefer implementing a 'barbell strategy' for 2026, rotating some cyclical exposure toward growth-oriented defensive stocks like pharmaceuticals."

Market attention now turns to Thursday's key inflation data following Tuesday's figures showing continued cooling in the US labor market.

For European equities, another significant catalyst remains Ukraine peace negotiations, which "highlight the tension between rising market optimism and geopolitical uncertainty," noted Ulrich Urbahn, head of multi-asset strategy at Berenberg. "Overall, the picture remains mixed."