* FTSEurofirst 300 down 1.2 percent at 1,145.09
* Banks and insurers as euro zone debt worries mount
* Portugal's PSI20 sheds 5.4 pct on political uncertainty
* Commodity stocks knocked by Egypt turmoil, China data
By David Brett
LONDON, July 3 Political turmoil in Portugal
that threatens to revive Europe's debt crisis, unrest in Egypt
and slowing growth in China combined to depress investor
sentiment on Wednesday and drag European shares lower.
Volumes were expected to tail off with Wall Street closing
for a half-day on Wednesday and shut all day on Thursday.
By 1051 GMT, the FTSEurofirst 300 was down 13.68
points, or 1.2 percent at 1,145.09, led by banks and
insurers, which fell 3.0 percent and 1.6 percent
respectively as the euro zone's debt worries returned.
Portuguese stocks shed 5.4 percent after the prime
minister refused to accept the resignation on Tuesday of his
foreign minister, raising the stakes in a political crisis that
could derail Lisbon's plan to exit its international bailout.
Bond yields in peripheral euro zone countries leaped higher,
driven also by nervousness over Greece's next tranche of bailout
money, which could be delayed by up to three months.
A cut by S&P ratings for Barclays, Deutsche Bank
and Credit Suisse overnight, to A from
A-plus, did little improve sentiment towards the banks.
Commodity-related stocks were under pressure
as escalating violence and political turmoil in Egypt, combined
with weak manufacturing growth in China, dented confidence.
The Euro STOXX 50 fell 1.9 percent to 2,552.02
points having failed to break above its 200-day moving average
and plunging through short-term support around 2,588 points.
But with European shares down around 9 percent from May 2013
highs, some strategists said that at current levels equities
remain relatively cheap, and investors could see significant
upside providing they can ride out the short-term volatility.
"We're entering a comfort zone for returning to European
equities. At this level we think it's a good entry point to
boost positions in equities," said Stephen Ausseur, equity
market strategist at Natixis.
He said there is potential for a rise of up to 30 percent in
European equities from current levels in Natixis' most bullish
scenario, and just a 10 percent fall in its most bearish case.
Standout performers on the upside included oil services firm
Tenaris which rallied 5.9 percent, with traders citing
talk of a positive ruling in anti-dumping case.
Africa-focused Tullow Oil climbed 2.6 percent after
a bullish update from Kenya.