* FTSEurofirst 300 down 0.4 percent;
* Ireland's downgrade hits Irish banking stocks
* U.S. July new home sales, durable goods data in focus
By Harpreet Bhal
LONDON, Aug 25 (Reuters) - European shares fell by midday on Wednesday, adding to hefty losses a day earlier, with Standard & Poor's cut to Ireland's credit rating weighing on sentiment and as fears persisted over the outlook for the global economy.
By 1111 GMT, the FTSEurofirst 300 index of top European shares was down 0.4 percent at 1,015.43 points, after closing at a one-month low in the previous session as disappointing U.S. housing data underscored concern over the pace of economic recovery.
The index has lost nearly 6 percent over the past three weeks, but volumes remain thin during the summer holiday period. Volumes on the index were at just 25 percent of its average 90-day volume by midday.
Irish banking stocks were under pressure, with Allied Irish Banks down 5.1 percent and Bank of Ireland down 2.8 percent after ratings agency S&P downgraded its credit ratings on Ireland and assigned the country a negative outlook, citing substantially higher costs to support its struggling financial institutions.
The cost of protecting Irish government bonds from default rose and the premium investors demand to buy Irish debt rather than German benchmarks climbed after the downgrade.
"The Ireland downgrade was not too much of a surprise but it is still weighing on sentiment. The theme so far has been one of better company earnings, but that has been weighed down by uncertainty over the economy," said Joshua Raymond, market strategist at City Index.
The market will closely monitor data from the across the Atlantic later in the day, including July's U.S. durable goods orders at 1230 GMT and new home sales data for the same period at 1400 GMT, for fresh clues on the health the world's largest economy.
"There is a big focus on economic data now that we've come through the earnings season. People are expecting very slow growth at the minimum but there is still a potential for a double dip and investors are looking towards economic data to help paint the picture for the potential for that."
Across Europe, Britain's FTSE 100, Germany's DAX and France's CAC-40 lost 0.3 to 0.6 percent. The Thomson Reuters Peripheral Eurozone Countries Index fell 0.9 percent.
GERMAN IFO RISES
Providing some support for the index following Ireland's credit rating downgrade, data from the Munich-based Ifo think tank showed German business morale rose to its highest level in more than three years in August.
The unexpected increase suggests Europe's largest economy will continue to steam ahead even if the pace of growth may slow, and highlights the divergence in growth prospects within the euro zone.
Germany's DAX is down 0.7 percent so far this year, outperforming a 5.2 percent drop year-to-date in Britain's FTSE 100 and a 11.8 percent decline in France's CAC-40.
Among individual movers in Europe, BHP Billiton, which has made a $39 billion hostile bid for Potash Corp, fell 0.6 percent after posting a 47 percent rise in second-half profit, but said it was cautious on the short-term global outlook.
Tullow Oil shed 5.9 percent after the oil explorer said the development of its Ugandan oil fields will be delayed due to a spat between the government and the firm's former partner Heritage Oil. On the upside, Belgian insurer Ageas rose 2.8 percent after reporting a surge of cash coming into its business in the first half, particularly in Asia, and strong earnings from its life insurance business.
(Editing by Erica Billingham)