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European stocks trade lower on Tuesday dragged down by mining and auto stocks as earnings from major banks including UBS and Commerzbank disappointed investors.

The pan-European STOXX 600 traded down 0.63 percent at the open.

European sentiment failed to get a lift from some of Asia's gains overnight; markets traded mostly higher despite a disappointing manufacturing purchasing manager's index (PMI) from China.

The China Caixin manufacturing PMI for April fell to 49.4 from March's 49.7, shrinking for a 14th straight month and coming in below a Reuters forecast for 49.9. Levels below 50 indicate contraction.

Basic resources stocks took a hit on the back of the news. Anglo American shares were over 5 percent lower while Rio Tinto, Glencore and BHP Billiton were all sharply lower.

But gold prices ticked up on Tuesday amid weakness in the US dollar. As a result, gold producer Randgold Resources was trading higher. And another gold producer, Fresnillo, was in positive territory after it said it achieved record gold and silver production in 2015, and said that 2016 will "see a turnaround" after "operational challenges" last year.

Market players in Australia were also closely watching the Reserve Bank of Australia, which cut rates by 25 basis points to a new all-time low of 1.75 percent.

In other Asia news, the International Monetary Fund (IMF) warned at a press briefing of a bumpy economic rebalancing in China and "larger spillovers" from its financial markets as being among the major risks clouding the growth outlook for Asia, Reuters reported. as the IMF gave a press briefing on the regional outlook.

UBS shares slide

Bank earnings are in the spotlight in Europe on Tuesday.

HSBC reported an 18 percent drop in adjusted pre-tax profit to USD 5.43 billion in the first quarter, but shares reacted positively.

Shares in French bank BNP Paribas rallied after it reported a 10 percent rise in net profit in the first quarter, beating expectations, but its investment banking division took a hit from a volatile market environment.

Germany's Commerzbank reported net income of 163 million euros (USD 188 million) for the first quarter of 2016, a 52 percent year-on-year fall, sending shares sharply lower.

UBS first-quarter adjusted profit before tax came in at 1.4 billion Swiss francs (USD 1.47 billion), the bank reported on Tuesday, down from adjusted profit before tax of 2.3 billion Swiss francs in the same period in 2015. Its wealth management business attracted strong inflows, but said it saw "abnormally low" transaction volumes in the first quarter as clients became more risk averse. Shares were deep in negative territory.

BMW shares hit brakes

Shares in German carmaker BMW fell sharply after it reported a 2.5 percent fall in first-quarter earnings before interest and tax (EBIT), missing market expectations.

And German airline Lufthansa said it was slowing its capacity growth due to price pressures, adding that the attacks in Brussels and Paris are affecting customers' booking behaviour. The carrier reported a first-quarter adjusted loss before interest and tax of 53 million euros, narrowing from the 167 million euro loss in the same period last year. Shares were over 5 percent lower. Other airlines including IAG and Air France-KLM were in negative territory.

Elsewhere, shares in RSA Insurance Group were higher after Barclays raised its price target for the stock.

But British fund management firm Aberdeen Asset Management shares were in the red after it reported a sharp fall in pretax profit for the six months to March 31.

Shares in food delivery service Just Eat rallied and were one of the best performers after it raised its full-year guidance.