The pan-European STOXX 600 <.STOXX> slid 0.3 percent as cyclical sectors weighed, while euro zone blue chips <.STOXX50E> fell 0.6 percent.

Britain's FTSE 100 <.FTSE> slipped 0.2 percent as investors awaited the Bank of England's monetary policy decision.

German stocks <.GDAXI> underperformed peers, down 0.4 percent as Siemens and Beiersdorf fell after results.

"German equities have been strongly impacted by the euro over the course of the last few weeks," said Pierre Bose, head of European strategy at Credit Suisse.

"We have also had some negative sector headlines on autos and industrials which have definitely weighed."

The DAX has fallen more than 6 percent from its record high hit on June 19.

"Earnings momentum and revisions have not been very strong in Germany but they are no worse than the middle of the pack, so the discount you are seeing relative to the rest of the euro zone is not fully merited," Bose added.

Energy stocks <.SXEP> fell 0.9 percent, weighed by Finnish refiner Neste (>> Neste) which dropped 7.4 percent after second quarter profit missed expectations.

Norwegian oil services firm TGS (>> TGS-Nopec Geophysical Company) also fell 5.3 percent, with traders citing slightly lighter revenues for the second quarter.

The oil and gas sector is the worst performer in Europe this year and the only one trading in the red.

While banks overall <.SX7P> fell on the day, shares in Italy's largest bank Unicredit (>> UniCredit SpA) bucked the trend, climbing 4.6 percent after reporting forecast-beating profits for the second quarter.

Unicredit helped Italy's blue-chips <.FTMIB> outperform, up 0.2 percent. Shares in Tenaris (>> Tenaris) meanwhile were suspended after sharply dropping at the open, after earnings were released overnight.

Credit Agricole (>> Crédit Agricole) shares fell 0.5 percent despite the bank's profits beating estimates.

Some traders cited concerns over one-off items flattering the earnings numbers.

German industrial giant Siemens (>> Siemens) fell 3.1 percent to the bottom of the DAX after it delayed its healthcare IPO and earnings missed estimates.

French stationery supplier Bic (>> Bic) jumped more than 6 percent to the top of France's SBF 120 <.SBF120> index after reporting sales up 3 percent in the first half.

Retailer Next (>> Next) jumped 9 percent, helping retail stocks <.SXRP> outperform, after the British firm returned to sales growth in the second quarter, boosted by improved product ranges and a better online offer.

Deutsche Telekom (>> Deutsche Telekom) was a rare gainer on the DAX, up 0.9 percent after its profit beat.

Exane strategists upgraded their view on the telecoms sector to 'overweight', saying after underperformance this year the second-quarter earnings season has been better.

"We see a favourable top-down environment for outperformance," they wrote.

Of the 56 percent of MSCI Europe companies having reported earnings for the quarter, 62 percent have either beaten or met estimates.

Basic materials, energy and financials were leading the sector table in terms of forecast-beating results, while utilities and industrials have seen the most forecast misses.

(Reporting by Helen Reid, Editing by Vikram Subhedar and Angus MacSwan)

By Helen Reid