Investors were keeping a close eye on monetary policy, a day ahead of the start of a central bank symposium in Jackson Hole, though dovish comments by European Central Bank chief Mario Draghi had little market impact.

Markets also shrugged off a PMI survey showing euro zone manufacturing businesses had their best month of growth in six and a half years in August.

"The last couple of weeks everyone has been sitting on the fence; there hasn't been a big directional view and people are struggling to decide which way to get off," said Graham Secker, chief European equity strategist at Morgan Stanley.

The pan-European STOXX 600 <.STOXX> dipped 0.3 percent while euro zone stocks and blue-chips <.STOXX50E> fell 0.2 percent.

WPP (>> WPP Group) shares lost as much as 10 percent value after the world's largest advertising group cut its full-year sales outlook after a drop in demand caused it to miss first-half targets.

The agency has been among the worst-performing stocks in the media sector, which has declined 4.8 percent overall this year against a buoyant broader European market.

"Deteriorating trading conditions are a concern and ...we are minded to trim our full year profit before tax forecasts by 4 to 5 percent," said Roddy Davidson, media analyst at Shore Capital.

The sector index <.SXMP> fell 2 percent, with WPP's French peer Publicis (>> Publicis Groupe) down 3 percent.

Potash miner K+S (>> K+S) was a bright spot, jumping more than 4 percent after a report in German business newsletter Platow Brief that hedge fund Elliott could be interested in the company.

With uncertainty over upcoming monetary policy pronouncements weighing on sentiment, utilities <.SX6P> made the biggest gains as investors reached for defensives.

Belgian chemicals group Umicore (>> Umicore) fell 3.5 percent after Berenberg cut the stock to "hold" on valuation concerns. It has gained around 19 percent year-to-date, outperforming the chemicals sector.

"Generating substantial upside to the current share price would require us to assume around 15 percent global pure electric vehicle sales penetration by 2025 (base case: 11 percent) or that Umicore captures over 60 percent of the global market for automotive grade NMC [batteries] by 2025," Berenberg analysts wrote.

Earnings for the STOXX 600 were set to grow 15.3 percent in the second quarter year-on-year, Thomson Reuters data showed.

Nine of the ten sectors were expected to see an improvement in earnings in what analysts have called a “good, but not great” earnings season after a record-breaking first quarter.

Energy stocks have seen the strongest earnings growth, at 47.8 percent, while pharmaceutical companies, whose high exposure to the U.S. has made the stronger euro a headache, saw the weakest earnings growth rate, at -3.4 percent.

(Reporting by Helen Reid, editing by Kit Rees and John Stonestreet)

By Helen Reid

Stocks treated in this article : Publicis Groupe, Umicore, K+S, Provident Financial, WPP Group