* 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 (Reuters) - 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.