* FTSEurofirst 300 index ends 0.5 percent lower
* Banks hit after Moody's puts Spain on review
* Novartis jumps on Alcon buyout
By Joanne Frearson
LONDON, Dec 15 (Reuters) - European shares fell on Wednesday, snapping their longest winning run in six months after Moody's said it could downgrade Spain's debt rating, leaving bank stocks among the day's biggest losers.
However, the market pared early falls as better than expected U.S. manufacturing and industrial data lifted Wall Street, while some analysts cited technical reasons.
The pan-European FTSEurofirst 300 index of top shares closed down 0.5 percent at 1,127.25 points, after being as low as 1,124.18.
"Moody's putting Spain on review brought to light all the troubles the euro zone is facing, but it has not been able to drive the whole market down substantially," Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets, said.
"For technical reasons I am expecting the dips to be bought -- fund managers who have lagged their benchmarks normally try to window dress their portfolios in December and put in better names which they might have missed earlier in the year."
Banking stocks, sensitive to changes in the economic environment, featured among the biggest decliners after the Moody's statement. Banco Santander, Barclays and Bank of Ireland fell between 2.6 and 3.7 percent.
Spain's IBEX 35 fell 1.5 percent, Portugal's PSI 20 was down 1 percent and Italy's benchmark slipped 1.4 percent. The Peripheral Eurozone Countries Index was 2.2 percent lower.
The euro fell against the dollar and hit a record low versus the Swiss franc, while Spanish government bonds underperformed other euro zone debt.
RETAIL FALLS
The market was also initially hurt after the U.S. Federal Reserve gave a cautious view on the economy late Tuesday, which said the recovery was still too slow to bring down unemployment.
Retail stocks were also under pressure, with the STOXX Europe 600 retail index down 1.3 percent. Inditex dropped 5.5 percent after signaling a slowdown in underlying sales.
"The problem is current trading," SG analyst Anne Critchlow said. "We've calculated minus 2 percent like-for-like (sales for the first six weeks of the fourth-quarter)," she added. "This does not bode well."
Elsewhere, Germany's Beiersdorf fell 5.7 percent after the maker of Nivea skin care products said it expects its profit margin to fall next year.
On the upside, drugmaker Novartis rose 4.9 percent after it clinched full ownership of eyecare group Alcon by sweetening its original offer with cash.
Across Europe, the FTSE 100 index was down 0.2 percent, Germany's DAX was 0.2 percent lower and France's CAC 40 was down 0.6 percent. (Editing by David Holmes)