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 was marginally higher at 293.31, after climbing 0.7% on Monday.

Shares of Danske Bank AS posted one of biggest losses 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 3.7% 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 3.9% 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 on Monday, prompting Financial Times editor and writer of the commentary Robin Harding to tweet that "people need to chill out. The Fed does not leak anything to any journalist to steer markets."

"On QE tapering, we think Bernanke will repeat the message that the timing of tapering is completely data-dependent. He is unlikely to give more-precise indications than to repeat that if the labor market continues to improve, QE tapering could start within the next few meetings. We continue to see a 50/50 chance of a September or a December start to tapering," analysts at Danske Bank said in a note.

"So far, job growth is set to stay around the 170,000 level in June, based on the most recent jobless claims data. This is just enough to keep expectations for a September move alive, but if inflation expectations continue to trend lower over the coming months and job growth stays below 200,000, this could push the first tapering into December," they added.

Inflation was also in the U.S. data headlines on Tuesday, after a report showed the consumer-price index rose a seasonally adjusted 0.1% in May, as the inflationary pressure on the broader economy was largely subdued.

Additionally, U.S. housing starts picked up 6.8% in May, signaling continued healthy activity in the building sector.

U.S. stocks opened higher 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 1.4% in Frankfurt, BMW AG shaved off 1.3% and Volkswagen AG fell 1.5%.

And in Italy, Fiat SpA gave up 0.8%.

Among country-specific indexes, Germany's DAX 30 index was slightly lower at 8,212.37, while France's CAC 40 index dropped 0.3% to 3,850.47.

The U.K.'s FTSE 100 index climbed 0.8% to 6,380.21, boosted by HSBC Holdings PLC (HBC) . The bank climbed 2.6% after Citigroup lifted the stock to buy from neutral.

Shares of EasyJet PLC added 2.9% after the budget airline said it will buy 135 A320 planes from Airbus for delivery between 2015 and 2022.

Subscribe to WSJ: http://online.wsj.com?mod=djnwires