European shares inched higher on Tuesday after two sessions of declines, as Swiss wealth manager UBS posted a surge in quarterly net profit, but gains were capped by concerns about extended lockdowns and US stimulus measures.

The pan-European STOXX 600 index rose 0.2% by 0808 GMT, after closing at more than two-week low in the previous session.

UBS gained 3.3% as high levels of client activity helped the world's largest wealth manager record a 137% rise in net profit.

The financial services index was up 1%, with Swedish buyout group EQT jumping 9.7% after it signed a deal to buy global real estate investment manager Exeter Property Group for $1.87 billion.

Italy's FTSE MIB hovered near a one-month low, with Prime Minister Giuseppe Conte set to resign later on Tuesday on hopes President Sergio Mattarella will give him a mandate to form a new government with broader backing in parliament.

Swiss drugmaker Novartis fell 3.2% after its fourth-quarter sales and profit rose less than analysts expected.