European shares lower
By 1052 GMT, the pan-European FTS Euro-first 300 indexes of top shares was down 0.1 percent at 1,141.13 points and extended falls briefly after data showed British manufacturing activity grew at its slowest pace in 20 months.
On the technical front, the euro zone's blue chip Euro STOXX 50 fell 0.3 percent to 2,854.40, staying below its 200-day moving average, which it briefly pierced earlier in the day, a negative signal for equities.
After lacklustre U.S. economic data on home prices, consumer sentiment and regional manufacturing on Tuesday, investors were cautious ahead of May's U.S. ADP Employment Report due at 1215 GMT, which is seen as a precursor to Friday's non-farm payrolls.
The Institute for Supply Management's monthly factory gauge, due at 1400 GMT, will also be scrutinised for any signs the U.S. economy is softening.
"The market is worried about the extent to which this soft patch of economic data is developing; we are outside the earnings season and being driven by macro factors," said Richard Batty, Global Investment Strategist, Standard Life Investments, which has 157 billion pounds of assets under management.
"Investors will watch the U.S. ISM data very closely and the extent to which the U.S. is able to create jobs.
The U.S. economy is very important in determining sentiment for the European economy."
Meanwhile hedge funds have been positioning themselves to be net short on the Standard & Poor's 500 index, according to a Societe Generale asset allocation note due to "mixed signals" in economic growth. Nokia shares slumped 7.5 percent, continuing their falls from the previous session, when the mobile phone maker dropped its full-year outlook, with analysts slashing their price targets in response.
Nomura analysts said it sees no compelling value case for the stock and reiterated it "reduce" rating.
In the UK, the FTSE 100, which fell 0.2 percent, was knocked by stocks going ex-dividend, with no new buyers of shares in Capital Shopping Centres, Intertek, Marks & Spencer National Grid, Vodafone and WPP entitled to the next dividend payment.
On the upside, Europe's second-largest insurer gained 3.4 percent after it unveiled a five-year plan to boost profits and featured among the top performers on the French CAC, which was down 0.2 percent.
Some market participants said merger and acquisition activity would give some support to the market and valuations remained attractive
"It's time to be 'long' equities, but stop playing the indexes and buy good undervalued stocks with sound fundamentals," said David Thebault, head of quantitative sales trading, at Paris-based Global Equities.
"We have M&A deals announced every single day. Buying these stocks is probably the best way to protect your portfolio from a potential correction during the summer."
Equity valuations on Thomson Reuters Datastream showed that forward price-to-earnings ratio have been falling on theEurope 600 since late August 2009 and now carry a one-year P/E of 10.4, below a 10-year average of 13.4.
COPYRIGHT REUTERS, 2011