European equities edged lower on Wednesday after their biggest one-day gain in more than 4 months in the previous session, as a decline in banking stocks offset higher pharma and food shares.

At 1132 GMT, the pan-European FTSEurofirst 300 .FTEU3 index of top shares was 0.2 percent lower at 1,009.49 points.

The index has gained 56 percent since reaching a lifetime low in early March and is up about 21 percent for the year.

Markets are daydreaming, said Christian Schmitt, market strategist at Helaba, pointing to earlier gains across Europe.

After yesterday's market hike there is no special argument why one should buy in today, he added.

Banks, which helped the index to gain 2.6 percent a day earlier as worries about Dubai's debt faded, took the most points off the FTSEurofirst 300 on Wednesday.

Royal Bank of Scotland (RBS.L) led banking shares lower, down 7 percent, with news that Britain will have a veto on bonuses at the part-nationalised bank, and a cautious note from Credit Suisse weighing on the sector.

HSBC (HSBA.L), BNP Paribas (BNPP.PA), Deutsche Bank (DBKGn.DE) and Standard Chartered (STAN.L) were down 1.4 to 3.5 percent.

The world's largest cellphone maker Nokia (NOK1V.HE) fell 1.1 percent. The company said it expects handset market volumes to grow around 10 percent next year, more than analysts expect. [ID:nGEE5B10M5]

Across Europe, the FTSE 100 .FTSE index was down 0.5 percent, Germany's DAX .GDAXI was 0.3 percent lower and France's CAC 40.FCHI was down 0.2 percent.

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Investors awaited U.S. ADP Employment report, due at 1315 GMT. Economists in a Reuters survey expected a loss of 155,000 jobs versus an October job loss of 203,000.

Investors have been cutting their positions in the run up before the Christmas holiday and minimising risk. It is risk aversion at the moment, said Justin Urquhart Stewart, director at Seven Investment Management.

With the ADP report, it is going to be fascinating to see if the level of unemployment is continuing to increase or if there are any signs it is bottoming out. The expectation is that is going to be weak so any improvement will be an encouraging sign.

Food producers advanced, with the DJ Stoxx European Food & Beverage Index .SX3P rising 1 percent to feature as the top sectoral gainer.

Nestle (NESN.VX) rose 1.1 percent, boosted by a note on 2010 by UBS, in which it has the stock as a suggested buy, along with pharma stocks AstraZeneca (AZN.L) and GlaxoSmithKline (GSK.L), that were 0.3 and 0.2 percent higher, respectively.

The DJ Stoxx European Health Care Index .SXDP was 0.4 percent higher. Swiss drugmaker Roche (ROG.VX) rose 0.6 percent after saying a diabetes treatment currently undergoing Phase III trials met primary endpoints in the most recent studies.