The pan-European STOXX 600 index settled 0.4% down after dropping as much as 1%, led by declines in technology companies and retail stocks.
A recent rise in sovereign debt yields on forecasts for rising inflation has weighed on risk-driven assets because the higher yields offer safer returns.
But yields in the euro zone dropped on Monday after European Central Bank (ECB) President Christine Lagarde said the bank was closely monitoring rising borrowing costs, which could point towards future ECB intervention in debt markets.
The current upward trajectory in bond yields it might lead to added pressure on equities, said SocGen strategist Roland Kaloyan.
Regional stocks have rallied sharply off pandemic-driven lows hit last year. But unlike their peers across the Atlantic, they have yet to reach pre-pandemic levels amid concerns over a stalling economic recovery and slow vaccine rollout.
But some industries, such as the technology sector, have flourished in the face of the pandemic.
The tech sector hit a 20-year high last week and Mirabaud analyst Neil Campling attributed recent losses to profit-taking after a "period of positive price action".
Travel and leisure stocks strengthened on Monday after British Prime Minister Boris Johnson set out a phased plan to end the country's COVID-19 lockdown.
The FTSE 100 also trimmed losses through the day, with British Airways owner IAG jumping more than 7% after raising its total liquidity by 2.45 billion pounds ($3.4 billion).
Security company G4S, however, tumbled nearly 10% after Canada's GardaWorld said it would not raise its takeover, handing victory to Allied Universal in their months-long bid battle.
Italy's Atlantia rose more than 4% on expectations that the infrastructure group would receive a binding offer for its 88% stake in motorway unit Autostrade per l'Italia this week.
French car parts maker Faurecia was another faller, retreating 4.7% after it swung to a net loss in 2020.
Swiss logistics company Kuehne & Nagel, meeanwhile, rose more than 2% after saying it would buy Asian rival Apex International Corp from private equity firm MBK Partners.
($1 = 0.7104 pounds)
(Reporting by Shashank Nayar in Bengaluru; Editing by Sriraj Kalluvila and David Goodman)
By Shashank Nayar and Ambar Warrick