European shares closed flat yesterday, with Shire leading pharmaceuticals up as it gained from a competitor's problems, and as the market shrugged off a Fitch downgrade of Portugal's sovereign debt.

The FTSEurofirst 300 index of top European shares rose 0.01 per cent to 1,072.54 points, a new 17-month closing high, having earlier sunk as low as 1,064.65. The European benchmark is up more than 66 per cent from its lifetime low of March 9, 2009.

Across Europe, Germany's DAX rose 0.4 per cent and France's CAC 40 lost 0.1 per cent, while Portugal's share benchmark fell one per cent. Shire rose 2.1 per cent, after gaining as much as 3.2 per cent to hit an all-time high, as ongoing manufacturing problems at US rival Genzyme boosted prospects for Shire's enzyme replacement treatments.

GlaxoSmithKline, AstraZeneca, Novartis and Novo Nordisk rose between 0.6 and 3.2 per cent. Several banks fell, after Fitch cut Portugal's debt rating by one notch to AA-.

The move came as concerns over Greece's debt situation remained and a day before a European Union summit. BBVA, HSBC, Danske Bank and Millennium BCP slipped between 0.2 and 2.2 per cent.

Banco Santander fell 2.5 per cent on speculation the bank was guiding down on its Brazilian loan growth target in London, traders said. Santander said the targets were unchanged.

"We kind of knew the Portugal downgrade was coming, so the markets weren't worried, but that is indicative of the high level of complacency in the markets," said Andy Lynch, fund manager at Schroders.