Germany's DAX index of blue chips traded down 1.1 percent at 4862.81, while the French CAC-40 index fell 0.6 percent to 3,208.68. The London stock exchange was closed for a bank holiday, as was the New York stock exchange for Memorial Day.
The closely watched Ifo institute's survey of German business confidence rose in May, but not as much as what was anticipated as sluggish demand weighed on construction and manufacturing in Europe's largest economy. The index increased to 84.2 points in May from 83.7 points in April.
This is the second consecutive increase since March, when the indicator hit a 26-year low of 82.2 points, but short of the 85.9 points Ifo had expected and the 85 points predicted by UniCredit.
Global stocks have been seeking direction after solid gains in recent weeks. Backward-looking data such as growth and manufacturing output has been less than encouraging, but some indicators of future activity have been more positive. Investors were looking ahead to key U.S. economic reports this week, including home sales, big-ticket manufactured goods and consumer confidence.
"I think people are catching their breath and seeing how things go," said Gerhard Schwarz, head of equities strategy at UniCredit. "We have of course seen an improvement in several leading indicators ... the big question is, how sustainable is this improvement?"
Asian markets fell back in midday trading after North Korea announced that it had successfully carried out an underground nuclear test. The country's official Korean Central News Agency called it "part of measures to bolster its nuclear deterrent for self-defense."
But investors soon regained their composer and turned their attention to domestic issues and the upcoming week's economic reports for further clues about the outlook for the U.S. and global economies.
South Korea's benchmark Kospi index regained nearly all its losses. It dove as much as 6.3 percent before bouncing back to end just 0.2 percent lower at 1,400.90. The won also recovered from a drop against the dollar.
Tokyo's benchmark Nikkei 225 stock average rose 121.19 points, or 1.3 percent, to 9,347.00 on a slightly weaker yen and gains by steel and drug makers. Hong Kong's Hang Seng index rose 0.4 percent to 17,121.82,
The region's markets have grown accustomed to such maneuvering by North Korea, said Linus Yip, a strategist at First Shanghai Securities Ltd. in Hong Kong.
"For the South Korean market, it's just an excuse for the market to make a correction because markets have shot up too much recently," Yip said. "But I don't see any great impact in other Asian markets."
Japanese electronic retailers prospered after The Nikkei financial daily said home appliance sales surged over the weekend. As part of its economic stimulus efforts, the government kicked off its "eco points" program to boost spending on environmentally friendly electronics. Bic Camera Inc. shot up 7.5 percent and rival Best Denki Co. surged almost 17 percent.
Markets in mainland China and Singapore which were down earlier as well, also rose into positive territory.
Thailand's benchmark index fell after figures showed that Southeast Asia's second-biggest economy contracted 7.1 percent in the first quarter from a year earlier.
The dollar edged up to 95.09 yen from 94.76 late Friday. The euro rose to $1.4004 from $1.3994.
