When the Fed concludes its monetary policy meeting later in the day, investors are hoping that policymakers will reiterate their accommodative stance to support financial markets as the coronavirus pandemic takes its toll.
In a busy earnings day, the pan-European STOXX 600 closed down 0.1%, with healthcare and banks <.SX7P> dragging on the main index, while retailers jumped 1.4%.
Drugmaker GlaxoSmithKline fell 3.2% as it missed second-quarter profit estimates after lower sales of its existing vaccines, while lender Barclays dropped 6.1% as it set aside a higher than expected 1.6 billion pounds to cover a possible rise in loan losses due to the pandemic.
The pair helped keep London's FTSE 100 nearly flat.
France's CAC 40 outperformed its continental peers with a 0.6% rise after positive earnings updates from luxury group Kering, electrical equipment group Schneider Electric and consulting firm Capgemini.
"Markets have rallied aggressively, so what we're seeing is companies coming with better numbers but not seeing an additional uptick in markets," said Will James, deputy head of European equities at Aberdeen Standard Investments.
"Companies that have managed earnings and sales, there have been aggressive cost measures put in place."
Profits for STOXX 600 companies are expected to drop by a record 59% in the second quarter, according to Refinitiv data. But with much of the decline priced in, European stocks are on course to end July with gains as investors bet on more stimulus.
Euro zone banks <.SX7E> took a beating as Deutsche Bank fell 2.5% after giving a slightly improved outlook for the year, but chief executive Christian Sewing damped speculation that the lender was eager to revive merger talks with Commerzbank.
Spain's Santander slid 4.7% as it reported a record net loss of 11.1 billion euros (10.05 billion pounds) in the second quarter.
Chemicals giant BASF SE dropped 4.9% as it said its dividend policy and the value of assets on its balance sheet might be revised given uncertainty caused by the coronavirus crisis.
UK retailer Next jumped 7.7% as it raised its profit forecast after sales fell less than feared over the past three months.
(Reporting by Sruthi Shankar in Bengaluru; Editing by Bernard Orr and Uttaresh.V)
By Sruthi Shankar