European shares were lower at midday on Tuesday, with banks the major losers after Qatar cut its stake in British bank Barclays (BARC.L).

By 1046 GMT, the pan-European FTSEurofirst 300 .FTEU3 index of top shares was down 0.1 percent at 1,025.57 points after rising to its highest close since Oct. 3, 2008 on Monday.

The benchmark index is still up nearly 59 percent from its lifetime low on March 9, but down 37 percent since reaching its mid-2007 peak.

It is a relatively modest fall. It is possibly just a bit of profit taking after what has been a very strong rally, said Peter Dixon, economist at Commerzbank.

Banks took the most points off the index. Barclays fell 5 percent after Qatar sold 379 million shares worth over 1.3 billion pound ($2.1 billion), stoking speculation it might use a big profit to make a move on British food retailer Sainsbury (SBRY.L).

HSBC (HSBA.L), Credit Suisse (CSGN.VX), and Credit Agricole (CAGR.PA) were down 0.8-1.9 percent.

Drugmakers were under pressure. Actelion (ATLN.VX) lost 3.3 percent after sales of its most important drug disappointed in the third quarter. 

Oils dipped as crude CLc1 retreated 0.4 percent. BG Group (BG.L), BP (BP.L), Royal Dutch Shell (RDSa.L) and Cairn Energy (CNE.L) were 0.6-1.7 percent lower.

SAINSBURY GAINS

On the upside, food retailers were in demand. Sainsbury was up 5.2 percent following the Qatar speculation, while Tesco (TSCO.L), Casino (CASP.PA) and Carrefour (CARR.PA) gained 1.5-1.7 percent.

But, Dutch grocer Ahold (AHLN.AS) slipped 2.8 percent after sales grew more slowly in the third quarter as food prices fell and recession-hit shoppers switched to cheaper goods, especially in the United States. 

Media stocks were on the rise, with British publishing group Pearson (PSON.L) 2.1 percent higher after raising full-year guidance, saying it now expected adjusted earnings to be at or above 60 pence per share following a strong performance from its education business. 

The technical analysts I talk to are still convinced that there is momentum behind the rally, said Andy Lynch, fund manager at Schroders.

A strong earnings report from Texas Instruments (TXN.N) injected optimism about recovery in the chip industry.

Chip design company ARM (ARM.L) was up 3.4 percent, while chipmaker Infineon (IFXGn.DE) was 1.7 percent higher and STMicroelectronics (STM.PA) gained 0.2 percent.

Across Europe, the FTSE 100 .FTSE index, Germany's DAX .GDAXI and France's CAC 40 .FCHI were all down 0.2 percent.