European shares fell on Wednesday as investors took money off the table after the previous session's jump and ahead of the outcome of the U.S. Federal Reserve's monetary policy meeting, although tech shares outperformed on Oracle's upbeat outlook.
The Fed is likely to push long-term borrowing costs lower by rebalancing its $2.8 trillion portfolio of bond holdings to weight it more heavily to longer-term securities, in a bid to encourage mortgage refinancing without stoking a run-up in consumer prices.
The U.S. central bank's likely moves will be aimed at invigorating the faltering economic recovery, embarking on what could be the first in a series of incremental steps to foster stronger growth. But equity investors decided to play safe.
At 0913 GMT, the FTSEurofirst 300 index of top European shares was down 0.7 percent at 927.54 points after rising 2 percent in the previous session.
The index is down about 17 percent so far this year on growth concerns and worries that the euro zone debt crisis could spread.
"The market expects that the Fed will come up with some new plans to stimulate the economy. Investors will be extremely disappointed if the Fed does not announce a plan to rebalance its portfolio," said Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets in Brussels.
"But if it does, we might see limited reaction as it is already priced in."
Technical outlook stayed negative after recent sell-offs. The Euro STOXX 50 , the euro zone's blue chip index, was down 0.9 percent at 2,120.99 points after gaining more than 2 percent on Tuesday. It was expected to get some support at around 2,076, a recent low.
Analysts said the index faced strong resistance at around 2,200 -- where a 16-point gap opened up over two trading days in early September.
"Looking at the relative strength index, the 2011 downtrend does appear to be loosing a little bit of momentum. However, at the moment we are lacking compelling signs for a major recovery," Phil Roberts, chief European technical strategist at Barclays Capital, said.
A break above 2,200 could possibly make the way for a move towards the 2,400 area, but beyond that the index was not expected to make much advance in the near term, he said, adding the big picture still looked bearish.
Anko Beldsnijder, managing director of MainFirst Asset Management that has 1 billion euros ($1.37 billion) worth of assets under management, said the market was being driven by sentiment and company fundamentals had little role to play.
"We have taken a very defensive stance and added companies like Nestle and Danone in our portfolio," he said, adding he liked sectors such as food and beverages and personal household goods in the current market environment.
Beldsnijder said the fund company further reduced its exposure to banking, industrial and automobile companies.
"We think that car companies are fundamentally very interesting, but it's just a top-down impact on that."
Auto shares , down 2 percent, featured among the top decliners on concerns a challenging global economic environment will hurt demand for vehicles. PSA Peugeot fell 3.8 percent, while Volkswagen dropped 2.5 percent.
However, technology shares were up 0.1 percent, outperforming the wider market on Oracle's robust software sales and forecast of higher-than-expected earnings for the current quarter.
Analysts said low valuations were not sufficient enough to induce investors to buy shares as earnings outlook could deteriorate, pushing price-to-earnings ratios higher again.
Europe's STOXX 600 index currently trades at 8.4 times its expected earnings, below a 10-year average of 13.2, according to Thomson Reuters Datastream. This compares with a price-to-earnings ratio of 11 for U.S. S&P 500 index .