European markets pared earlier gains to close down as investors absorbed Friday's late release of  European banks' stress tests.

Manufacturing-sector purchasing managers' data for Italy and Spain showed the indices unexpectedly fell in July from June. However, a reading from Germany beat an earlier estimate, putting the eurozone manufacturing sector PMI as a whole at 52.0, above the 51.9 initially forecast by Markit.

But in the U.K. the manufacturing PMI tumbled more than initially reported by Markit to the lowest point in almost three and a half years.

The pound lost as much as 0.4% on the post-Brexit manufacturing drop but pared losses to sit at $1.3214, 0.12% down, by the end of the U.K. business day.

In London, the FTSE 100 lost 0.37% to end the day at 6,699.83.

Miners were among the gainers on the benchmark index, with Anglo American rising 2.2%, BHP Billiton (BHP)  up 2% and Rio Tinto (RIO) was up 1%.

In Frankfurt, the Dax was little changed at 10,337.79 and the Cac 40 was 0.59% down at 4,413.83.

The EBA's adverse scenario included GDP shrinkage for two consecutive years. Almost all banks emerged with a common equity Tier One capital ratio above the minimum 4.5% floor, though Monte dei Paschi (BMDPY) was wiped out under the adverse scenario.

However, the Italian lender had shortly before the results came out announced a plan to sell up to €5 billion ($5.6 billion) of shares and hive off loans with a book value of €27.7 billion into a securitization vehicle at one-third of their value.

The European banking index lost 2.58%.

Monte dei Paschi surged in early morning trading, but ended the day just 0.6% up. UniCredit, which clocked up a capital ratio of 7.1%, had a very volatile day, with the shares being suspended three times after hitting triggers. It ended the day 9% down.

Allied Irish Banks, the second worst performer in stress tests, dipped on the opening but closed more than 12% up. Deutsche Bank, (DB - Get Report) which emerged with a 7.8% common equity Tier One ratio, lost 1.9%.

Austria's Raiffeisen Bank, one of the weakest performing of the lenders tested, was down more than 4%.

Meanwhile, Millennium BCP, Portugal's largest listed bank, lost 5.5% in Lisbon after China's Fosun offered to buy a stake of almost 17%.

Banks in the U.K., which performed relatively well in the tests, were also down. Royal Bank of Scotland (RBS) was down 1.8% and Barclays (BCS) was down 1.9%.