European shares drifted lower in midday trading on Tuesday, breaking a three-day winning streak, led lower by banks with Greek lenders taking a beating on concerns over Athens's fiscal measures to cut deficits and debt. At 1148 GMT, the FTSEurofirst 300 index of leading European shares was down 0.3 percent at 1,014.88 points, ahead of a raft of U.S. economic data. The index hit a one-week closing high on Monday.
Banks were the main drag on the pan-European index, with HSBC, Deutsche Bank, Barclays, Dexia, Banco Santander and Credit Suisse down 1 to 2.5 percent. "What you have seen in the last four to six weeks is … banks starting to lag the market for the first time in nine months," said Robert Quinn, European strategist at Standard & Poor's equity research in London.
"That's largely a question you get to the end of the year when the buyside fund managers start to crystallise their returns. It might be quite a good time to possibly get back to the banks in the start of the new year."
The banking sector was also weighed down by a report that Austria's top cooperative bank, Oesterreichische Volksbanken, had been put on a watch list by the country's central bank and its financial market regulator.
The Austrian cooperative bank said it was at no risk of nationalisation and the report was inaccurate.
Greek bank shares were under pressure, with analysts citing concerns about the government failing to announce tougher measures to shore up the country's finances. National Bank of Greece, EFG Eurobank and Bank of Piraeus lost 2.1 to 3.5 percent.
German economic think tank ZEW's monthly poll of economic sentiment declined for a third consecutive month in December.
Later in the session, U.S. data on producer prices and industrial output will provide more clues on the outlook for the world's biggest economy, one day before the Federal Reserve's interest rate decision and accompanying statement.
But the market's weakness was limited by gains in defensive food producers, utilities and tobacco firms. Unilever, Danone, United Utilities and British American Tobacco gained 0.2 to 1.5 percent.
Around Europe, Britain's FTSE 100 index was off 0.7 percent, Germany's DAX index down 0.2 percent and France's CAC 40 down 0.2 percent.
OTHER FALLERS
Among shares on the downside, Hennes & Mauritz dropped 1.4 percent after the Swedish fashion retailer undershot expectations with a 9 percent fall in same-store sales in November.
Cadbury shed 0.5 percent after Kraft Foods vowed to maintain discipline in its pursuit of the British confectioner.
German truckmaker MAN advanced 3 percent after German newspaper Sueddeutsche Zeitung quoted an unidentified company executive as saying MAN expects a full takeover bid by Volkswagen, which was up 0.6 percent.
Both MAN and Volkswagen declined to comment on the report.
Within the auto sector, Volvo lost 1.6 percent after the world's second largest truck maker said its deliveries fell 37 percent in November on a year ago, with no signs yet of an upturn.
The FTSEurofirst 300 has rallied 57 percent since reaching a record low in March after last year's dismal performance, and is is on track for its best annual performance since 2005.
