By Sara Sjolin, MarketWatch

LONDON (MarketWatch) -- European stock markets moved cautiously higher on Tuesday, as investors remained wary ahead of the U.S. Federal Reserve's policy meeting, on fears it could signal a potential slowdown in the bank's asset purchases.

The Stoxx Europe 600 index gained 0.2% to 294.04, after climbing 0.7% on Monday.

Shares of Danske Bank AS posted the biggest loss in the index, off 5.7%, after the Danish Financial Supervisory Authority ordered the bank to adjust its internal rating model, saying the lender underestimated its risky assets.

On a more upbeat note, shares of Whitbread PLC gained 4.4% after the hotel and restaurant operator reported a 13.8% rise in total sales, as cold weather boosted sales at coffee shops.

Shares of Kabel Deutschland Holdings AG climbed 3.7% after the firm confirmed late Monday it has received a preliminary takeover proposal from Liberty Global PLC (LBTYA).

For the broader European stock markets, investors were cautious about placing any big positions ahead of the U.S. Fed's two-day meeting, which ends Wednesday. A report in the Financial Times said late Monday that Fed Chairman Ben Bernanke is likely to signal the central bank is close to scaling back its $85-billion-a-month asset-purchase program, as the economy is getting stronger.

The report curbed enthusiasm on the U.S. markets, prompting Financial Times editor and writer of the commentary Rob Harding to tweet that "people need to chill out. The Fed does not leak anything to journalists to steer markets."

U.S. stocks pointed to a higher open on Wall Street.

Back in Europe, the ZEW indicator for economic sentiment in Germany improved 2.1 points in June to 38.5, slightly better than expectations of a 38 print.

Among notable movers in Europe, car makers posted some of the biggest losses, after data showed new car registrations in the European Union dropped to the lowest level in 20 years in May.

Shares of Daimler AG lost 1.1% in Frankfurt, BMW AG shaved off 0.8% and Volkswagen AG fell 1.1%.

And in Italy, Fiat SpA gave up 0.7%.

Among country-specific indexes, Germany's DAX 30 index added 0.1% to 8,226.71, while France's CAC 40 index gained 0.1% to 3,865.84.

The U.K.'s FTSE 100 index climbed 0.8% to 6,380.44, boosted by HSBC Holdings PLC (HBC) . The bank climbed 2.3% after Citigroup lifted the stock to buy from neutral.

Shares of EasyJet PLC added 3.5% after the budget airline said it will buy 135 A320 planes from Airbus for delivery between 2015 and 2022.

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