European share prices were down by mid-session on Wednesday, resuming their steep one-week sell-off as banks sank again, hurt by Spanish lender BBVA's poor quarterly results and a rising bad loan ratio.
Investors, cautious ahead of the U.S. Federal Reserve's interest rate decision and comments due later on Wednesday, were also rattled by growing concerns over monetary tightening in China that could dampen demand for commodities and slow the global economic recovery.
At 1134 GMT, the FTSEurofirst 300 index of top European shares was down 0.3 percent at 1,020.34 points, after falling to a seven-week low of 1,007.87.
The index, which has dropped 4.6 percent in one week, is on track to record a third straight weekly loss, its worst sell-off since early July.
"A big part of the recovery has already been priced in, so equities don't react to good news anymore, but react to any piece of negative news," said Pierre Sabatier, president and head of strategy at PrimeView in Paris.
"Even if monetary policy remains extremely favourable and corporate results are improving, the market was ripe for a correction. Historically, very few market rebounds as strong as this one didn't experience a correction of at least 10 percent at some point."
Shares in BBVA, Spain's second-largest bank and the first major European bank to report quarterly results, tumbled 5.3 percent, while Banco Santander sank 3.4 percent, Royal Bank of Scotland shed 2.6 percent and Banco Popolare fell 2.6 percent.
China's banking regulator, reacting after a surge in new lending at the start of the year, instructed lenders on Wednesday to ensure an even pace of credit growth this year.
The news weighed on metal prices such as copper, and knocked mining shares lower, with Xstrata down 3.1 percent, Anglo American down 2.1 percent and Antofagasta down 1.6 percent.
EYES ON FED
The Fed's decision is due at 1915 GMT, and while the central bank is seen holding interest rates in its current zero to 0.25 percent range, the real focus is expected to be on its statement.
After recent mixed economic data such as December existing home sales that showed the biggest ever one-month decline, the Fed is seen leaving its policy statement largely unchanged.
The recent equities market slide has dragged European stocks to their lowest level since early December. Stocks in the FTSEurofirst 300 index currently trade at 15.3 times earnings, according to Thomson Reuters data.
Around Europe on Wednesday, UK's FTSE 100 index was down 0.5 percent, Germany's DAX index down 0.2 percent, and France's CAC 40 down 0.6 percent.
So far this year, the FTSE 100 is down 3 percent, the DAX is down 5.1 percent and the CAC 40 is down 3.9 percent.
Lafarge, the world's top cement maker, and Holcim, the number two, both fell 2.4 percent, dragged by weak results from Mexican rival Cemex.
Shares in Tullow Oil dropped 4.8 percent after the London-based oil explorer launched a share placing which could raise almost 1 billion pounds to pay for the development of assets in Uganda.
Bucking the trend, German software maker SAP gained 0.8 percent after saying it expects to increase its core sales and operating margins in 2010.
