By Carla Mozee, MarketWatch

Pandora shares shine

LONDON (MarketWatch) -- European stocks recovered after an earlier fall Tuesday, but gains were somewhat capped by uncertainty about Greece's future in the eurozone after key debt talks fell apart.

The Stoxx Europe 600 ended less than 1 point higher, rising 0.1%, at 377.02. The index opened lower following a collapse in debt talks late Monday between Greece and eurozone finance ministers, known as the Eurogroup. Greece's new antiausterity government rejected an extension to its 240-billion-euro ($272 billion) bailout program under the conditions offered by its European partners.

Greek bank stocks finished among the biggest decliners on the Stoxx 600, with Piraeus Bank SA shares losing 9%, Alpha Bank SA down 8.6% and Eurobank Ergasias SA off 8.1%. The moves pressured Greece's Athex Composite , which fell 2.5% to 838.61. The Athex's month-to-date gain has now been reduced to 16.2%.

Finance ministers from the European Union, known as Ecofin, met Tuesday, and a new meeting of the Eurogroup may be scheduled for Friday. Read: These 5 charts explain the latest Greek drama.

"Whether or not the Greek government will stick to its guns is difficult to predict, but they seem increasingly cornered," said Société Générale economist Yvan Mamalet in a note Tuesday.

European Central Bank officials are scheduled to hold a regular meeting on Wednesday. The agenda is expected to include a discussion about emergency liquidity assistance, which was recently increased for Greek banks. Discussing the ELA funding "looks certain to add pressure, by reiterating the current ELA program will remain only as long as Greek banks are seen as solvent and also as long as the Greek government is in talks with the euro area," said Mamalet.

The euro (EURUSD) had fallen after the breakdown in talks, but later revved higher against the U.S. dollar to buy $1.1393, versus $1.1356 late Monday.

Investors appear "to be taking in stride the latest setback in negotiations over Greece," said Marc Chandler, global head of currency strategy at Brown Brothers Harriman, in a note Tuesday. "Each side has their inviolable principles, and yet some compromise has to be found. It might not be possible to do so on the finance minister level, but may require another heads of state gathering to break the logjam."

Chandler also noted that discussions about institutional financial-stability frameworks are not just about Greece and its creditors "but about other anti-austerity parties that may come to power later this year in Spain and Portugal."

European benchmarks: Germany's DAX narrowed its loss to 0.3% at 10,895.62. The closely watched ZEW indicator of German economic sentiment rose in February to 53.0, the highest reading since February of last year. But the reading, released Tuesday, fell short of the 55.5 consensus estimate.

The Center for European Economic Research, or ZEW, said the ECB's quantitative easing and "unexpectedly high" economic growth in the fourth quarter have aided sentiment. "On the other hand, the intensification of the Ukraine crisis and the collision course of the new Greek government are dampening expectations," said ZEW President Professor Clemens Fuest in a statement.

France's CAC also came off deeper losses to end down less than 1 point at 4,751.91. The U.K.'s FTSE 100 turned higher by 0.6% to 6,898.13, as consumer-related shares pushed higher. On Tuesday, the U.K.'s Office for National Statistics said consumer-price inflation slowed to 0.3% in January, the lowest annual rate since March 1960.

Stoxx 600 Movers: TNT Express NV shares dropped to the bottom of the index, losing 9.8%, after the Dutch parcel delivery company swung to a fourth-quarter loss of 137 million euros ($156 million).

Banco BPI SA shares charged up 27% after Spain's Caixabank SA offered to take over the rest of the Portuguese bank it doesn't already own for roughly EUR1.09 billion euros ($1.24 billion).

Pandora A/S shot up 17%, driving to the top of the Stoxx 600. The Danish jeweler said fourth-quarter sales jumped 40% and that it will raise its annual dividend for 2015 by 38%.

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