European stocks ended a volatile session with small gains as optimism over upbeat earnings and deal-related news outweighed a slump in oil prices.

The Stoxx Europe 600 SXXP, +0.18% rose 0.2% to settle at 340.93, posting its first rise in three sessions.

U.S. stocks retreated from record levels to close lower Monday, as investors turned cautious ahead of a busy week of earnings and central bank meetings.

Stocks pared early losses, but the S&P 500 SPX, -0.30% closed down 6.55 points, or 0.3%, at 2,168.48, with all sectors finishing lower except consumer discretionary, which logged a fractional gain.

The Dow Jones Industrial Average DJIA, -0.42% finished down 77.79 points, or 0.4%, at 18,493.06, trimming what had been a 118-point deficit.

Meanwhile the Nasdaq Composite Index COMP, -0.05% shed 2.53 points, or 0.1%, to close at 5,097.63. Earlier in the session, the index had been down nearly 18 points.

The Federal Reserve kicks off its monetary policy meeting on Tuesday and will announce its decision on Wednesday at 2 p.m. Eastern time. The central bank is widely expected to hold interest rates steady and stop short of signaling a possible rate increase in September because of continued uncertainty about the economic outlook.

Caution gripped Asian markets on Tuesday, sending the safe-haven yen scampering higher ahead of central bank meetings in the United States and Japan, while a fresh skid in oil dampened energy stocks.

Japan's Nikkei .N225 shed 1.5 percent, with investors seemingly unimpressed by a Nikkei report the government planned a direct fiscal stimulus of around 6 trillion yen ($56 billion) over the next few years.