* FTSEurofirst 300 falls 0.6 pct after 1-week high on Tue
* Investors wait for Portuguese auction, U.S. economic data
* For up-to-the-minute market news, click on
By Atul Prakash
LONDON, Jan 5 (Reuters) - European shares retreated on Wednesday from their highest in more than a week, with investors trading cautiously ahead of Portuguese treasury bill auctions and U.S. private sector employment and non-manufacturing data.
At 0948 GMT, the FTSEurofirst 300 index of top European shares was down 0.6 percent at 1,134.79 points after falling to a low of 1,131.70 earlier in the session. It rose 0.9 percent to its highest closing in more than a week on Tuesday.
Chemical shares featured among the top decliners, with the European sector index slipping 1.6 percent on concerns about a slowdown in world demand. Global chemicals market leader BASF fell 3.5 percent.
Investors kept an eye on Portugal, which will pay almost twice as much to sell six-month paper on Wednesday as it did in September, keeping the country at the sharp end of persistent market concerns about euro zone debt.
The market has been fretting about Portugal's public finances, the sustainability of its large debt burden and prospects of the Iberian country becoming the next euro zone member to seek a bailout after Ireland and Greece.
"This is a serious test for the market. People are cautious to see how the Portuguese auctions go," said Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets.
"What we see today in the market is a reality check of the fact that there are still quite a bit of worries around. We still have big questions about the U.S. economy."
Macroeconomic data also dampened sentiment. Figures showed that growth in the euro zone services sector slowed in December as activity in Ireland and Spain shrank.
The Markit Eurozone Services Purchasing Managers' Index (PMI), which measures the activities of thousands of businesses ranging from banks to restaurants, fell in December to 54.2 from 55.4 in November.
MINERS TRACK METALS
Miners came under pressure from lower metals prices, with copper prices falling on Wednesday from record highs in the previous session after a flurry of risk aversion sent commodities to their lowest in nearly two months.
The STOXX Europe 600 Basic Materials index fell 1.1 percent, while BHP Billiton and Anglo American were down 2 percent and 1.9 percent respectively.
"Cautious optimism is probably where we are for the time being. There might just be an element of nerves creeping back into the market as investors return to their desks," said Keith Bowman, equity analyst at Hargreaves Lansdown.
"We are likely to remain very data sensitive."
Investors waited for U.S. ISM non-manufacturing data, due at 1500 GMT, the ADP National employment survey at 1230 GMT and the Challenger Layoffs numbers for December at 1315 GMT to get some hints about Friday's crucial U.S. December jobs report.
Among individual movers, Associated British Foods fell 1.6 percent as Investec Securities cut its rating for the food producer to "hold" from "buy" on valuation grounds.
Agrochemicals group Syngenta rose 1.5 percent after better-than-expected results from U.S. rival Mosaic.
Across Europe, Britain's FTSE 100, Germany's DAX and France's CAC 40 fell 0.3 to 1.2 percent. Portugal's PSI 20 was down 0.7 percent. (Editing by Sharon Lindores)