The game marked the beginning of Pearce’s third Championship in charge but their opponents produced a dominant display at the Bloomfield Stadium in Tel Aviv.
“We didn’t play very well, that was there for all to see. The better team won tonight,” said Pearce.
“They caused us problems all night. We didn’t get any performances from our bigger players.
“We were well beaten and we can’t grumble. It was a stagnant performance and there was nobody running in behind.
“I’m not sure what he chalked the goal off for but they should have had a penalty in the first half. Now we’ve got to reload and go again at the weekend”
The first real chance of the game fell to Italy after nine minutes when Genoa striker Ciro Immobile latched onto a long ball over the top, but his shot flew just beyond the far corner.
They continued to enjoy the better start and applied more pressure to Jack Butland’s goal but it was a defensive mix-up that nearly handed them the lead.
Dealing with an innocuous ball forward, Nathaniel Clyne and his goalkeeper nearly collided before the Southampton full-back eventually got back well to clear the ball away.
Napoli forward Insigne was proving to be a tricky customer and he had a pair of chances to give his team the lead with 20 minutes played.
First, a hanging cross from the right side found him in the penalty area, with time and space, but after taking a touch, he dragged a poor effort wide of the near post.
Moments later, the 22-year-old was once again the centre of attention after his neat one-two set up another opportunity, but the onrushing Butland did enough to force the forward to lift his flicked shot over the bar.
Despite being on the back-foot for the majority of the half, England managed to force opposition shot-stopper Francesco Bardi into a save with half-an-hour gone.
After neat build-up play found Marvin Sordell, the Bolton man delivered a cross that deflected out into the path of Jason Lowe.
Taking a touch to steady himself, the Blackburn midfielder’s long-range strike made Bardi scramble to keep out the low effort – with a goal kick bizarrely being awarded.
Attacking efforts continued to come for Pearce’s team as Nathan Redmond beat Luca Caldirola with a classy bodyswerve to get it back on his favoured left-foot, but the shot went high and wide.
The major incident on the half came on 39 minutes when Italy’s penalty appeals were waved away by French referee Anthony Gautier.
Dangerman Insigne lead a threatening counter attack for his team, after a superb pass found the breaking Alessandro Florenzi.
After darting into the area, Florenzi cleverly nutmegged Jack Robinson before being taken down, and there was a sense of shock across the stadium as the referee surprisingly waved play on.
Anger reigned supreme amongst Devis Mangia’s squad as the half-time whistle blew, as England breathed a sigh of relief after coming in all-square.
This shut-out meant that Pearce’s team had now completed 14 hours without conceding a goal.
The ball was in the net with just moments gone of the second period, but Connor Wickham was deemed to be in an offside position, after lifting Jonjo Shelvey’s neat pass into the unguarded goal.
Shortly after, the Liverpool midfielder was involved once again as England thought they had broken the deadlock.
After Steven Caulker turned a teasing corner across the box, centre-half partner Craig Dawson found the net with a glanced header.
Chaos followed the goal being awarded though as referee Gautier overruled his earlier decision – with replays failed to identify as clear reason for the turnaround.
With 61 minutes played, Stoke-bound Butland proved to the hero as he clawed away a good header by Fabio Borini, following excellent wing play from Florenzi.
It was a case of mixed fortunes just moments later though as his failure to claim from a corner and a miscued clearance handed Borini an opening, but the latter fired wide from a tight angle.
The inevitable eventually happened with just ten minutes remaining as Mangia’s men opened the scoring.
Following Clyne’s poor challenge on Manolo Gabbiadini, Insigne stepped up to curl a wonderful free-kick over the helpless wall and past the stretching keeper, from 20 yards out.
Despite trying their best to rescue a point – with Redmond once again shooting over the bar and Bardi turning away Jordan Henderson’s last-gasp free kick – England began their campaign with defeat to the five-time winners and pre tournament favourites.
This was their first defeat since November 2011 against Belgium, as they were convincingly beaten by an impressive and experienced Italian outfit.
Next up is Saturday’s clash with Norway, who played out a 2-2 draw with hosts Israel in the opening fixture, as they look to keep hopes of a first success in the tournament since 1984 alive.
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