European shares turned negative on Friday after a senior euro zone government source said credit rating agency Standard & Poor's was set to downgrade several euro zone countries.

The pan-European FTSEurofirst 300 <.FTEU3> index of top shares was down 0.3 percent at 1,016.19 points after touching a session high of 1,026.81.

There is a rumour that S&P is about to downgrade several countries. That is what is causing the weakness in stocks, a London-based trader said.

Autos <.SXAP>, strong gainers in the early days of 2012, were among the biggest fallers, down 2 percent. Italy's Fiat fell 3.1 percent.

Across Europe, Italy's FTSE MIB <.FTMIB> was one of the weakest performers, down 1.6 percent.

European shares had been in positive territory earlier, helped by an Italian debt auction in which yields dropped. Italy raised the maximum amount planned but could not match the same level of interest as at Thursday's Spanish debt sale, at which twice the planned amount of bonds was snapped up.

Bond and FX investors took a less sanguine view of the Italian auction. Italian secondary market bond yields rose and the euro weakened against the dollar.

The Dow Jones industrial average <.DJI>, the Standard & Poor's 500 Index <.SPX> and the Nasdaq Composite Index <.IXIC> fell between 0.7 and 0.9 percent in early trading.

Lower fourth-quarter profit at JPMorgan Chase & Co in the United States showed the wide reach of the euro zone debt crisis and its impact on trading and corporate deal-making. The bank's shares fell 3.6 percent.

(Additional reporting by Joanne Frearson; editing by Nigel Stephenson)