European share prices had slipped by midday on Monday, led lower by financials and commodity stocks after a reported missile launch by North Korea unsettled markets and crude oil and metals prices retreated.
At 1046 GMT the FTSEurofirst 300 index of top European shares was down 1.7 percent at 842.77 points after closing 0.2 percent higher on Monday. The index is on track for its third day of falls in the last four sessions.
The index, which is up more than 30 percent since hitting a lifetime low on March 9, was pressured by financials, with Dexia falling 9 percent, UBS slipping 4.5 percent and Lloyds down 5.1 percent.
Energy shares also lost ground as crude oil prices slipped more than 3 percent. BP, Royal Dutch Shell, BG Group, Tullow Oil , Repsol, Total and StatoilHydro shed 0.7-2 percent.
"People are still wondering what kind of recovery we are looking at and that makes people hesitant," said Valerie Plagnol, chief strategist at CM-CIC Securities, in Paris.
"There is still a lot of risk aversion in the market and the North Korean story is not helping either. We are not in a very stable environment right now," she added.
North Korea, defiant in the face of international condemnation of its latest nuclear test, fired two short-range missiles off its east coast on Tuesday and accused the United States of plotting against its government.
Analysts said the moves had underlined political risk as a factor in markets but stressed that investors were in wait-and-see mode anyway.
"I would expect the North Korea political event to weigh on the market for one or two days, not more — markets are waiting for new macro data, new announcements, and volumes have diminished a lot in the past three weeks," said Thierry Lacraz, strategist at Swiss bank Pictet.
"We are stuck in the middle of nowhere, between the 200-day moving average and 30-day moving average, with investors not wanting to take a clear position before any trend is confirmed."
In recent sessions the FTSEurofirst 300 index has traded near the bottom of its uptrend channel extending back to early March, now at around 850 points. The top of the channel is currently at 920 points.
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Investors awaited U.S. consumer confidence figures, due later in the day, after data showed a record slump in exports and investment sparked the German economy's biggest contraction since reunification in the first quarter. Euro zone industrial new orders also plunged in March.
Miners were also under pressure as key base metal prices fell. BHP Billiton, Anglo American, Antofagasta, Xstrata and Eurasian Natural Resources fell 2.2-3.7 percent.
Rio Tinto fell 4.4 percent after the miner agreed with Nippon Steel to cut key iron ore prices by a third in this year's first contract deal.
German cement maker HeidelbergCement fell 5.7 percent as traders pointed to market talk that Commerzbank may place shares in the company, but the company said it was not aware of any share placement.
Shares in Danone fell 7 percent after the French food group unveiled plans to raise about 3 billion euros ($4.2 billion) by selling shares to existing shareholders to cut debt and fund bolt-on acquisitions.
Despite recent declines the European index is on track for a third successive month of gains, the first time in two years that it has had such a long winning streak.
Across Europe, Britain's FTSE, Germany's DAX and France's CAC were down 1.5-2.3 percent.
