European shares edged down around midday on Wednesday, surrendering early gains after Fitch Ratings downgraded Portugal's sovereign rating, with banks among the worst performers.
By 1149 GMT (7:49 a.m. EDT), the FTSEurofirst 300 index of top European shares was down 0.2 percent at 1,069.93 points, after dropping as low as 1,064.65 soon after the Fitch announcement.
The pan-European index has gained around 65 percent since hitting a record low in March last year, but the market's sharp recovery from a dismal 2008 has lost steam over the past few months, and Europe's benchmark is up a meager 2.2 percent so far in 2010.
Banks reversed earlier gains to turn negative and feature among the worst performers. BBVA, HSBC and Credit Suisse
slipped 0.7 to 2.6 percent.
Banco Santander shares fell 3.7 percent on speculation the bank was guiding down on its Brazilian loan growth target in London, traders said. Santander was not immediately available for comment. "The Fitch news has turned the market around. This is a reality check. It blows away the view that the Greek situation is contained," said Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets in Brussels.
"Investors are taking money off the table."
Fitch cut Portugal's debt rating by one notch to AA-. The move comes as concerns over Greece's debt situation remain and a day before an European Union summit.
Across Europe, the FTSE 100 index was down 0.3 percent, Germany's DAX fell 0.2 percent and France's CAC 40 lost 0.6 percent, while Portugal's share benchmark fell 1.8 percent.
OILS WEIGH
Oil stocks were out of favor. Crude lost 1.8 percent on concerns over a build-up in U.S. crude stocks. Cairn Energy, Royal Dutch Shell and Total fell 0.4 to 1.2 percent.
On the upside, Deutsche Boerse gained 4.6 percent after it announced more cost savings measures.
Fiat rose 2.3 percent after newspaper reports said it is planning higher than expected job cuts of 5,000 in Italy and may spin off its car activities sooner than thought this summer. Fiat declined to comment on the reports.
Drugmakers added the most points to the index as investors stuck to the safety of defensive stocks. Novartis, GlaxoSmithKline and Novo Nordisk gained 0.2 to 1.2 percent.
At 1230 GMT, investors will closely watch the UK budget for detail on fresh economic measures and any sign of a boost in popularity for the ruling Labour Party.
Later in the session, investors will focus on a range of data from the United States, including the mortgage market index, durable goods figures and new home sales numbers, for further evidence of the country's economic recovery.