Drops in DAX and Lisbon market weigh on European shares

* DAX falls after weak ZEW data

* BES plunges to record low, weighs on Lisbon stock market

By Sudip Kar-Gupta

LONDON, July 15 (Reuters) - European stocks fell as declining investor morale hit Germany's benchmark DAX equity index and lingering worries over Portuguese bank BES weakened the Lisbon stock market.

The declines on the DAX and Lisbon's PSI (Dusseldorf: PSAN.DU - news) -20 equity index contributed to a retreat by the region's stock markets on Tuesday from the multi-year highs they reached in late June.

The DAX fell 0.5 percent to 9,730.14 points, down from its record high of 10,050.98 points in late June. The ZEW survey on Tuesday showed that German analyst and investor morale dropped in July for a seventh straight month, to its lowest level since December 2012.

"The ZEW was a bit on the weak side," said Darren Courtney-Cook, head of trading at Central Markets Investment Management. He would look to "short" - or bet on future falls - the DAX at the 9,750-point level, he said.

But he remained optimistic about European equities for the longer term, considering the steps taken by the European Central Bank to stimulate the region's economy. The ECB cut interest rates to a record low last month.

"I'd still be bullish, even if the DAX fell to 9,400 points," said Courtney-Cook.

A 17.3 percent slump at Software AG (Xetra: 330400 - news) also weighed on the Frankfurt stock market. The company said it now expected 2014 revenues to be stagnant compared with a year earlier.

The pan-European FTSEurofirst 300 index was down by 0.1 percent. The euro zone's blue-chip Euro STOXX 50 index declined by 0.6 percent to 3,165.95 points.

The Lisbon stock market fell 1.4 percent, as shares in Banco Espirito Santo (BES) plunged to a record low. Portugal's largest listed bank has been dogged by persistent worries over its exposure to the troubled companies of its founding family.

Trading Central analyst Philippe Delabarre said it could take some time before European stock markets resumed the advance it made for much of 2014. The FTSEurofirst 300 is still up by 3.4 percent since the beginning of the year.

Europe bourses in 2014: http://link.reuters.com/pap87v

Asset performance in 2014: http://link.reuters.com/gap87v

Today's European research round-up (Additional reporting by Francesco Canepa; Editing by Larry King)