European equities were trading higher Tuesday, with investors around the world watching how Chinese stocks are trading after a sharp drop on Monday and volatile trade in the current session.

The pan-European Stoxx 600 index was trading 0.4 percent higher Tuesday.

In Asia overnight, stocks mostly narrowed their early declines near mid-day, taking their cues from the mainland, where the benchmark Shanghai Composite index recouped some losses after trading down as much as 5.1 percent early Tuesday. The China Securities regulator announced Tuesday that it was investigating whether share-dumping was behind Monday's sell-off, Reuters reported.

Shares of Zurich Insurance were trading 2.5 percent lower on Tuesday after the company said it was weighing up a bid for British rival RSA Insurance Group.

Diageo shares were down 0.2 percent on news that the global drinks maker is planning to restructure its South African and Namibian operations and sell equity stakes in its joint ventures in the region to Heineken.

in other news, the U.K.'s gross domestic product (GDP) grew by 0.7 percent in the second quarter of 2015, according to preliminary official data, meeting expectations.

Earnings are also in focus for markets on Tuesday. French tire maker Michelin posted solid gains in first-half sales and profit on Tuesday, holding firm to its full-year goals. Shares of the company were trading 5.14 percent lower on Tuesday, however.

Elsewhere, Norwegian oil major Statoil posted better-than-forecast second-quarter profit on Tuesday despite taking a hit due to lower oil prices. Shares of the oil company were trading 3 percent higher Tuesday.

BP, one of the world's biggest oil companies, announced a second-quarter replacement cost loss of $6.3 billion Tuesday, and warned that low oil prices are here to stay. Its shares were trading lower by 0.8 percent Tuesday.

Focus in Asia and Europe is also on the fall in commodity prices. Spot gold was trading at its weakest level since early 2010 on Tuesday at $1,093.45 an ounce and U.S. crude futures were trading around $47 a barrel.

In other news, discussions to complete a third bailout program between Greece and its creditors will start on Tuesday, a week later than planned. The pressure is mounting on Prime Minister Alexis Tsipras to maintain unity in his Syriza party as the more leftist members oppose the bailout package, which demands deeper austerity measures in Greece.