The FTSE shares on Wednesday as concerns over Europe's debt problems returned to the fore ahead of Spanish and Italian debt auctions later this week.

The UK benchmark <.FTSE> was down 9.99 points, or 0.2 percent, at 5,686.71 by 09:17 a.m. BT, having jumped 1.5 percent on Tuesday, partly due to optimism about the U.S. earnings season after an upbeat outlook from Alcoa .

Atif Latif, director of equities and derivatives at Guardian Stockbrokers, said that with euro zone sovereign funding problems unresolved, the market could have got ahead of itself, and may be set for a correction to December lows at around 5,330.

We have seen more flow back onto the defensive side, with more downside protection being added and some longs being trimmed, he said.

There has been no marked improvement in the macroeconomic situation, and pressures still remain. We would look to add into short positions for downside protection.

Bill McNamara, technical analyst at Charles Stanley, said the FTSE 100 would need to see a close above the intra-day high from October at 5,747 before being out of the woods, and failure here would probably deal a significant blow to sentiment in the near term.

Energy stocks <.FTNMX8350> were the biggest drag on the blue-chip index, led by a 1.2-percent drop in Royal Dutch Shell as U.S. crude futures eased back, with confidence dented by nervousness about the euro zone situation.

Broker recommendation changes were behind a number of moves on the blue-chip index on Wednesday.

Aggreko shed 1.2 percent as Credit Suisse downgraded its rating for the temporary power supplier to neutral from outperform, with an increased target price of 2,140 pence up from 2,000 pence, after a strong run.

Household products group Reckitt Benckiser added 1.4 percent as traders cited the impact of an upgrade in rating by Morgan Stanley and a target price hike by BofA Merrill Lynch.

Peer Unilever , however, saw its shares shed 2 percent as both Morgan Stanley and Merrill Lynch downgraded its rating, traders said.

Morgan Stanley lifted its stance for Reckitt to overweight from equal-weight, and made the reverse change for Unilever, down to equal-weight from overweight, with both changes mainly made on valuation grounds, traders said.

Merrill Lynch, meanwhile, cut Unilever to underperform from neutral, and reduced its price objective to 2,140 pence from 2,190 pence, also highlighting the stock's premium rating.


Retailers found favour, with J Sainsbury up 0.8 percent after the grocer beat Christmas sales forecasts as store extensions and its expansion into convenience outlets, online shopping and non-food ranges helped it take market share.

Analysts believe Sainsbury's had the strongest December of Britain's top four grocers based on market research data from Kantar Worldpanel published on Tuesday.

It is clear that Sainsbury has had a very good Christmas, and with the Kantar data showing that (Wal-Mart's ) Asda has also performed relatively well, it looks as though Tesco will be weak tomorrow, Espirito Santo said in a note.

This significant underperformance of Tesco relative to Sainsbury is in part due to the growth in Sainsbury's non-food business (from a relatively low base) whereas Tesco's non-food continues to act as a major drag, the broker said.

A day before its Christmas trading update, Tesco shares slipped 0.1 percent.

Among mid-caps, SuperGroup , the company behind the Superdry fashion brand, and Greggs , the baker, enjoyed respective gains of 2.2 percent and 0.4 percent after unveiling rises in their sales over the festive period.

(Editing by Will Waterman)