Europe close: Stocks end lower after downbeat ZEW report

European stocks incurred in moderate losses, led lower by basic resources, and as the latest ZEW survey showed German investor sentiment fell to its lowest level since November 2012 in the wake of the EU's decision to leave the European Union.

The benchmark Stoxx Europe 600 index down 0.41%, Germany's DAX was 0.81% weaker and France’s CAC 40 lost 0.63%.

Oil prices slipped too, with West Texas Intermediate and Brent crude down 0.915% at $44.83 a barrel and $46.77, respectively.

Chris Beauchamp, senior market analyst at IG, said: “The ‘wall of worry’ appears to be getting bigger, with investors trimming some positions after a good run that has seen some markets hit new all-time highs.

"The situation in Turkey continues to provide cause for concern, as it becomes more and more apparent that President Erdogan is taking this opportunity to tighten his grip on the country in a way that will concern both the EU and NATO. Turkey’s strategic position means developments here will be keenly-watched, with a shift to authoritarianism hurting the nascent rally in emerging markets. With risk appetite on the wane for now, it is not surprising to see miners take a hit.”

The mood was also undermined by the latest survey from the ZEW Center for European Economic Research in Mannheim, which showed Brexit concerns sent German investor sentiment tumbling in July.

The indicator of economic sentiment fell to -6.8 from 19.2 in June, missing expectations for a reading of 9.0.

Meanwhile, the current situation index fell to 49.8 from 54.5 in June, undershooting expectations of 51.8, while the index of eurozone economic sentiment fell 34.9 points to -14.7.

Professor Achim Wambach, President of ZEW, said: “The Brexit vote has surprised the majority of financial market experts. Uncertainty about the vote’s consequences for the German economy is largely responsible for the substantial decline in economic sentiment.

“In particular, concerns about the export prospects and the stability of the European banking and financial system are likely to be a burden on the economic outlook.”

Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics, said: the figures were “horrific”.

“This is much worse than we expected, and points to downside risks to EZ economic survey data this week. The month-to-month fall in the expectations index is close to a record, only eclipsed by the collapse during the dark days in 2012, when investors were seriously contemplating that the Eurozone would break up.

“The modest silver lining, though, is that such large falls usually mean-revert quickly. Brexit was a shock to investors, but the aftermath has sent a clear signal that the process of the UK leaving the EU will be a slow burner, at least in the short run.”

In terms of sectors, miners were the worst performers, with the Stoxx 600 basic resources index down 2.38% amid declining metals prices.

In corporate news, Swedish industrial rubber maker Trelleborg gained after its earnings met expectations but the company sounded a cautious note on the outlook.

Dutch paint and chemicals maker AkzoNobel lost ground despite posting better-than-forecast second-quarter earnings.

Rio Tinto was on the back foot after a second-quarter operations review, while Royal Mail was just a touch weaker after it said trading for the three months ended 26 June was in line with its expectations, with group revenue up 1% and UK revenue down 1%.

Stock in pharmaceutical company Novartis dipped even after reporting slightly better-than-expected second-quarter profit but warning that profit for the year could fall.

Online clothing retailer Zalando surged after lifting its 2016 profit guidance and reporting a strong second quarter.