LONDON (CNN) - Europe's main markets ended mixed Wednesday, with investor caution in the U.S. offsetting a report that business confidence in Germany rose unexpectedly in July.
A report by Germany's Ifo institute showed the business climate index for Europe's largest economy rose to 89.8 in July from a five-year low of 89.5 in June, boosting investor sentiment.
But continuing pessimism about the world's biggest economy a day after the U.S. Federal Reserve indicated it could remain sluggish for some time weighed on investor sentiment.
London's FTSE 100 index closed 0.5 percent lower at 5,404.0, the CAC 40 blue chip index in Paris ended down 0.5 percent at 4,810.7, while Frankfurt's electronically-traded Xetra Dax was up by 0.3 percent at 5,229.52.
Telecom stocks reversed midday gains across Europe, countering rises in oil and gas and automaking shares.
Finland's Nokia, the world's biggest maker of wireless phones, was down 1.2 percent and Sweden's Ericsson, the No. 1 supplier of high-speed cellular network equipment, fell 0.9 percent..
Telecoms testing equipment company Spirent (SPT) led losers in London, falling 8.6 percent, while business data services company Energis (EGS) dropped 8.3 percent.
Factor controls maker Invensys (ISYS) was off more than 6 percent while cable TV operator Telewest Communications (TWT) reversed gains to end 4.6 percent lower. BT (BT-A) slumped 3.4 percent.
Oil firms were in favour in the wake of a report from the American Petroleum Institute that estimated U.S. crude and gasoline reserves have fallen sharply.
Boost for oil shares
Shell Transport and Trading (SHEL) ended 1.4 percent higher in London and its partner Royal Dutch, with which it owns the Royal Dutch/Shell group, rose 1 percent in Amsterdam. BP (BP-A) rose 0.6 percent.
Total Fina Elf (PFP) closed 0.9 percent higher in Paris.
In Frankfurt, the Xetra Dax led its European peers in the wake of the Ifo report, with German airline Lufthansa (FLHA) topping the gainers, up more than 4 percent.
Mail giant Deutsche Post (FDPW) advanced 3.6 percent while financial services company MLP (FMLP) showed a 2.5 percent gain. Europe's second-largest chipmaker, Infineon Technologies (FIFX), was up by 1.6 percent.
Automaker BMW (FBMW) rose 0.6 percent while DaimlerChrysler (FDCX) rose 1.8 percent, but Volkswagen (FVOW) was off 0.4 percent.
The pan-European FTSE Eurotop 300, a broader index of the region's largest stocks, advanced 0.4 percent, with the automobile and oil and gas all up by nearly 1 percent.
In Paris, France Telecom (PFTE) led the losers, falling 2.7 percent along with Vivendi Universal (PEX), the world's second-largest media conglomerate.
Mobile phone operator Orange (PORA) reversed earlier gains to close 1.8 percent lower.
In Amsterdam, the AEX index fell 0.6 percent, while the SMI in Zurich was down 1.1 percent. Milan's MIB30 was up 0.2 percent.
Growth for Nestle
Switzerland's Nestle, the world's largest foodmaker, lost 1.9 percent despite climbing earlier in Zurich after saying its half-year profit rose 12.7 percent on strong growth in emerging markets.
U.S. investors were ambivalent in early trading Wednesday, as they weighed positive news about the technology sector with continuing pessimism about the economy, a day after the Federal Reserve cut interest rates a quarter of a percentage point to 3.5 percent -- the seventh reduction this year.
The Nasdaq composite index gained 4.84 to reach 1,836.14 in mid-morning trade, while the Dow Jones industrial average fell 11 points to 10,163.21. 
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