European shares fell early on Thursday to snap a five-day winning run after the United States deflated hopes of an early economic recovery by cutting growth forecasts and Standard & Poor's cut its outlook on the United Kingdom.
At 0846 GMT, the FTSEurofirst 300 index of top European shares was down 1.9 percent at 859.28 points. The benchmark has rallied 33 percent from a lifetime low hit on March 9.
On Wednesday, the United States cut its forecasts for the next three years, forecasting sharper shrinkage of the economy this year than it did in January.
"There are concerns finally coming through about where the underlying growth is going to come from," said Justin Urquhart Stewart, investment director at Seven Investment Management.
"We need a growing level of demand. There's a certain amount of restocking happening, and unfortunately the market has been taking that as a sign of a recovery, which it is not," he said.
Adding to investor nerves, Standard & Poor's cut its outlook on the United Kingdom to negative from stable, saying the country's debt burden may approach 100 percent of gross domestic product and stay at that level in the medium term.
Miners were broadly weaker, with BHP Billiton, Rio Tinto and Anglo American down 1.6-5.6 percent as copper fell 2.2 percent, while heavyweight oil shares BP, Shell and Total lost 1.5-2 percent as oil took a breather below $62 a barrel.
Steelmaker ArcelorMittal was a prominent faller, losing 4.9 percent after Moody's cut its rating to the lowest investment grade, citing concerns over the effect weak steel markets will have on the company's credit profile.
Across Europe, Britain's FTSE was down 2.4 percent, Germany's DAX down 1.8 percent and France's CAC down 1.8 percent.
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European shares fell 45 percent in 2008, punctured by a credit market crisis that forced governments to bail out banks and tipped major economies into recession.
Since March 9, however, shares have risen sharply, driven by hopes that the downturn will not be as deep and prolonged as originally feared. Banks and commodity stocks led the recovery, and many big company results beat forecasts, though analysts have been cutting estimates ahead of the announcements.
Macro data has been broadly stronger, and on Thursday, surveys showed that the euro zone's services and manufacturing sectors contracted less than expected in May as firms saw the pace of decline in new orders ease
Markit's Eurozone Flash Services Purchasing Managers Index rose to 44.7 in May from 43.8 last month, beating the consensus estimate of 44.5. That was the third month in a row it picked up and took it to highest level since October.
However, markets focused on the U.S. figures and the S&P outlook cut for the United Kingdom.
"It underlines we will get further weakness — we have to run through the cycle. Any recession led by bank weakness is going to be double a normal recession," said Urquhart Stewart.
