Europe close: Stocks slip despite dovish Fed

Stocks on the Continent finished lower despite a 'dovish' testimony by Federal Reserve chairman Jerome Powell before the US Congress, as the single currency gained on the back of his remarks and investors focused on his remarks.

Delivering his semiannual Monetary Policy report to the US House Financial Services committee, Powell said there were increased risks bearing down on the US economy from overseas and that price pressures remained muted.

Traders had been wary that he might want to row back on expectations for rate cuts following the recent US-China trade truce and after an unexpectedly strong reading on the US jobs market for June.

In the background, overnight it was reported that the Presidents of the US and China had held their first telephone conversation since the G20 leaders's summit at the end of June, although no details were forthcoming.

By the end of the trading day, the benchmark Stoxx 600 had turned around again to finish 0.20% lower to 387.15, alongside a retreat of 0.51% to 12,373.41 for the German Dax, although the FTSE Mibtel was ahead by 0.73% at 22,044.96.

Meanwhile, front month Brent crude oil futures gained 3.53% to $66.51 a barrel on the ICE and euro/dollar added 0.43% to 1.12565.

In parallel, the yield on the benchmark 10-year German bund was rose by five basis points to -0.31%.

There were some positive surprises on the economic front.

According to INSEE, French industrial output expanded at a clip of 2.1% month-on-month, far exceeding the 0.3% rise expected by economists.

In Italy meanwhile, industrial production was 0.9% higher month-on-month (consensus: 0.1%).

Several Spanish issues with exposure to Mexico, including BBVA, Iberdrola and Telefonica were in the red throughout much of the session following the shock resignation overnight of the North American country's finance minister, although by the end of the session Iberdrola had managed to eke out a small gain.

Germany's Leoni was a tad lower despite a Reuters report that it was exploring a sale or flotation of its wire and cables unit.