European benchmarks snapped a nine-day winning streak in midsession trade yesterday, led lower by insurers as a loss-making unit marred Zurich's results and a broker downgraded Allianz.
Britain's second-largest insurer, Prudential, was among the biggest blue-chip losers as it went ex-dividend.
However, the food and beverage sector managed gains as the world's biggest foods group Nestle reported stronger-than-expected organic sales growth.
Sentiment was knocked by news the French economy contracted by 0.3 per cent in the second quarter of this year as exports, consumer spending and investment all fell. The weaker-than-expected data did not bode well for equities, economists said.
"The second-quarter was probably the low point but was considerably lower than foreseen. Policy-makers have systematically underestimated problems facing euro zone economies," said Mark Cliffe, chief economist at ING Financial Markets.
"There is also no real confidence, there will be a vigorous upturn in the second half which provides a gloomy backdrop for corporate earnings and will challenge equity analysts' growth forecasts."
The benchmark 10-year bund yield slipped slightly to 4.120 per cent after the weak French GDP data.
Germany's Bayer was the biggest blue-chip gainer after US regulators approved its new anti-impotence pill.
By 1046 GMT, the FTSE Eurotop 300 index was down 0.12 per cent at 901 points, while the DJ Euro Stoxx 50 index lost 0.29 per cent to 2,571 points.
Volume on the benchmark FTSE Eurotop 300 index was 802 million euros and decliners outnumbered advancers by a ratio of 1.7 to one.
Around Europe, Britain's FTSE 100 index was 0.66 per cent lower, Germany's DAX was 0.07 per cent down, France's CAC 40 was 0.4 per cent weaker and the Swiss SMI was 0.07 per cent easier.
The Eurotop 300 clocked up its highest close in 8-1/2 months on Tuesday after nine straight sessions of gains as investors banked on economic recovery to put balance sheets on an even keel.
"Earnings downgrades in Europe continued over the last month, but the pace of reductions eased further," said Bernd Meyer, a strategist at Deutsche Bank in Frankfurt.
He added several companies turning around flagging businesses are the main drivers of expected earnings growth in 2003, pinpointing Telefonica, Vivendi Universal and Credit Suisse among example.
U.S. stock index futures indicated that Wall Street was also headed for a weaker opening after computer and printer giant Hewlett-Packard sank 10 percent in after-hours trade.
The Dow industrial component reported quarterly sales and profits below market expectations.
Coffee Fuels Nestle Swiss food giant Nestle put on 1.4 percent after the firm said first-half organic sales growth was a better-than-expected 5.5 percent and would hold around that rate for 2003, helped by higher prices in coffee and water.
Meanwhile, in the drug sector, Germany's Bayer was up 2.1 percent after it won approval to sell its impotence treatment Levitra in the United States to rival Viagra.
The green light from the Food and Drug Administration was vital for Bayer whose sub-scale drugs business is trying to recover from the disastrous withdrawal of cholesterol drug Baycol two years ago.
Insurers eased after the sector hit its best levels for the year on Tuesday.
Europe's second biggest insurer by market capitalisation, Allianz, dropped 2.2 percent after Goldman Sachs downgraded the stock to "underperform" from "in-line".
Elsewhere in the insurance sector, Zurich Financial was off three percent after generally better-than-expected results were marred by the loss-making Centre unit.