The pan-European STOXX 600 <.STOXX> gave up gains to end the session with a 0.3 percent loss, weighed down by weaker banking stocks, and bringing two sessions of straight gains to an end.

However, the tech index <.SX8P> was a bright spot, up 1.5 percent and hitting its highest since June 2001 with sentiment boosted by Apple shares trading at record levels and Microsoft gaining on news of an acquisition.

"All big names from Apple to Amazon and Microsoft are able to make huge buybacks and acquisitions and the internal growth of most of these companies is pretty much in line with expectations," Prime Partners equity analyst Jerome Schupp.

"For sure valuations are not the same as one or two years ago. If you just look at valuations, let's say of Amazon, you don't buy because they're pretty expensive," he said.

Dutch chipmaker ASM was among the biggest gainers, up 5.8 percent after Credit Suisse started coverage of the stock with an "outperform" rating, citing expectations of healthy growth due to the increasing complexity of semiconductors.

Prime Partners' Schupp also said companies like software maker SAP or chipmaker Infineon were doing relatively well, even though he said the size of the U.S. market provided investors with more options to gain tech exposure.

SAP was up 1.2 percent and Infineon gained 2.7 percent.

The IT sector has a weighting of only 5 percent in the MSCI Europe index, compared to 26 percent of the MSCI USA.

However, worries over Italian politics were not far away, given the rollercoaster that indexes saw last week when two anti-establishment parties managed to form a coalition, putting an end to three months of political deadlock.

Comments on Tuesday by Italy's new prime minister, Giuseppe Conte, promising to increase spending did not sit well with markets.

Shares in Italian banks Intesa Sanpaolo, Unicredit and BPER all fell 3.4 to 3.8 percent, among the biggest fallers on Europe's banks index <.SX7P>, which was down 1.7 percent, the biggest sectoral faller.

RBS added further pressure with a fall of 5.3 percent after the British government sold a 7.7-percent stake in the bank for 2.5 billion pounds, realising a loss of more than two billion pounds on part of its investment in the lender it rescued in 2008.

(Reporting by Danilo Masoni and Kit Rees; Editing by Gareth Jones)

By Danilo Masoni and Kit Rees