European shares fell on Tuesday, with miners among the biggest casualties after top metals consumer China reported lower growth rates, while French stocks underperformed following a warning from Moody's about the country's credit rating.
Strategists said a summit this weekend, which may result in a plan to tackle the euro zone debt crisis, remained key to market sentiment.
Copper prices fell sharply, leading to weaker share prices of miners, after China's economic expansion slowed in the third quarter to its weakest pace since early 2009 as euro-debt strains and a sluggish U.S. economy took their toll.
The STOXX Europe 600 Basic Resources Index fell 3 percent, and has lost more than 32 percent in 2011.
If China slows down, all other bets are off, though the number was only slightly down but it's clearly had a negative impact on the market, said Ian King head of international equities at Legal & General, which has 356 billion pounds ($558 billion) under management.
At 1116 GMT, the pan-European FTSEurofirst 300 index was down 1 percent at 956.84 points, following a 1 percent fall on Monday after German Finance Minister Wolfgang Schaeuble said it was unrealistic to expect a definitive solution to the euro zone debt crisis at an European Union summit this weekend.
The benchmark is down more than 14 percent in 2011 on worries about the euro zone crisis and weak growth but hit a 10-week high prior to Schaeuble's comments, and is still up more than 12 percent from a September low. L&G's King said there was scope for the rally to resume on news from the summit.
If politicians say they are committed to doing all they can to bail out their neighbours, that they're working on a plan to recapitalise the banking sector and longer term we may even consider harmonisation of fiscal policy, you would certainly see a positive reaction in the markets.
France's CAC 40 , down 1.8 percent, underperformed the broader equity market after Moody's said on Monday it may slap a negative outlook on the country's Aaa credit rating in the next three months if the costs for helping to bail out banks and other euro zone members stretch its budget too much.
French Finance Minister Francois Baroin tried to play down Moody's warning saying the country's rating was solid, but investors were unconvinced and focused instead on his comments on GDP growth. He said a growth target for next year would probably have to be revised down.
French banking stocks were lower, with heavyweight BNP Paribas down 6.3 percent. A credit downgrade would have implications for funding costs, King said.
Investors were given fresh reminders about a weak macroeconomic backdrop in Europe on Tuesday. German investor sentiment fell to its lowest level in nearly three years in October on uncertainty about the euro zone debt crisis.
However, some analysts played down the significance of the data.
The 'real' economy is moderating but not collapsing whilst investors' confidence is mainly driven by the unprecedented crisis... (the impact of which) is difficult to predict, strategists at Newedge Group said in a note.
The two-day decline takes the benchmark closer to a support level of 932.7, the 23.6 percent Fibonacci retracement of its fall from a 2011 high in February to its low in September.